Index Investing: It Makes Active Management Better

Elisabetta Basilico and Tommi Johnsen ()
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Elisabetta Basilico: Applied Quantitative Analysis LLC
Tommi Johnsen: University of Denver

Chapter 3 in Smart(er) Investing, 2019, pp 19-35 from Springer

Abstract: 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.

Date: 2019
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DOI: 10.1007/978-3-030-26692-9_3

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