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Fee Concerns Driving Rise of Passive Strategies

According to research from Cerulli, the move toward passive investing continues. In 2013, $60 billion flowed into passive U.S. equity strategies compared to just $3.4 billion for active; and $31.8 billion flowed into passively managed taxable bond funds, while active strategies had a $9.8 billion outflow. From early 2009 to the end of last year, passive investing grew from $542.1 billion to $1.7 billion, according to Cerulli. That aligns with ICI data for the same period.

Cerulli speculates that the desire for lower fees is outweighing investors’ need to mitigate risk. A survey of asset managers indicates that international and global equities, as well as fixed income, are most likely to tilt toward passive investing. Overall, inflows for active funds in 2014 still outweigh passive investing as indexing varies by asset class.

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