BlackRock’s iShares, the world’s largest manager of exchange-traded funds (ETFs), has published new research examining how European investment professionals are approaching the question of whether and how to blend active management and indexing.
Stephen Cohen, Head of Investment Strategies and Insights for iShares, EMEA: “Indexing, through index mutual funds or ETFs, now accounts for over 11% of assets under management in the European asset management industry.”
The study found that most investors share the view that the blending of active management and indexing will continue to grow and it is no longer a question of ‘active versus passive’.
Thirty-five European businesses with combined assets under management (AUM) of approximately EUR 2.4 trillion from across the wealth, discretionary and advisory market place took part in the study to identify how they approach investing as well as the major catalysts and obstacles to blending active and index products.
Client demand, cost, market dynamics and regulation were identified as the key catalysts that have driven changes in the industry so far and are likely to accelerate the pace of blending in the future.
Stephen Cohen, Head of Investment Strategies and Insights for iShares, EMEA said: “Indexing, through index mutual funds or ETFs, now accounts for over 11% of assets under management in the European asset management industry. This growth has contributed to the increased combination of active management and indexing within blending investment strategies.
“Our findings, however, show there is no single answer to blending. While asset class efficiency was identified as the most common starting point for blending decisions, there are many factors driving current practice, in particular investment philosophy, client demand and the market cycle.”
David Gardner, Head of iShares Sales EMEA, concluded: “Our clients often ask us how they can use active and index funds together in their portfolios, and unsurprisingly, how their peers are using them too. This deep qualitative research was undertaken to allow investors to identify not only where on the blending scale they currently sit, but where they need to be in the future to maintain a competitive edge.
“The conversation has long since moved on from active vs passive, it is now a question as to what extent investors are incorporating both styles into their portfolios and the drivers that have brought this shift on. As a fiduciary to our clients, we hope to use our research and expertise as a guide on the potential opportunities that blending index and active instruments can present.”