The recent news reported by P&I (free registration required) that $255 billion CalPERS is considering going all-passive highlights the trend toward index funds in pension and retirement plans as well as among individual investors. Recent developments — Fidelity offering 65 BlackRock ETFs commission-free, Schwab and TD Ameritrade each offering more than 100 ETFs at no trading cost, and Schwab’s all-ETF platform — seem to bolster that trend. In the first two months of 2013, passive funds took in 62% of the flow. Active funds still have a 72% market share, but that’s down from 86% a decade ago.
But before we throw the baby out with the bathwater, many successful advisors and portfolio managers still see a place for active management, especially as a component in TDFs and managed accounts. As PIMCO’s John Miller pointed out in a recent post, indexed bond funds in an era of low interest rates may not be the best choice. Regardless, the industry will be watching CalPERS, which is expected to complete its review in August.
