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Index Investing: It Makes Active Management Better

  • Elisabetta Basilico
  • Tommi Johnsen
Chapter
  • 103 Downloads

Abstract

At the end of 2017, assets invested in US index mutual funds and ETFs topped $6.7 trillion, representing 34.6% of current equity mutual fund assets. Given that they were $11 million in 1975, the growth has been nothing short of phenomenal. And, as if that is not enough, State Street predicts that global ETFs assets could reach $25 trillion by 2025, a $2.2 trillion per year increase. A study by PWC forecasts that active management will represent 60% of global AUM by 2025, down from 71% in 2016, while passive investment will grow from 17% to 25% globally. Despite this growth, it is important to keep in mind that the percentage of the US stock market held in the form of index funds is still low: 13% at the end of 2017. This compares to 16% for active mutual funds and 71% for other investors.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Elisabetta Basilico
    • 1
  • Tommi Johnsen
    • 2
  1. 1.Applied Quantitative Analysis LLCDenverUSA
  2. 2.Reiman School of FinanceUniversity of DenverDenverUSA

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