As cumulative flows into emerging market passive funds surpass active alternatives investors should seek opportunities further down the market-cap scale, Aviva Investors head of emerging markets and Asia Pacific Will Ballard argues.

As cumulative flows into emerging market passive funds surpass active alternatives investors should seek opportunities further down the market-cap scale, Aviva Investors head of emerging markets and Asia Pacific Will Ballard argues.
Passive investors pay scant regard to the fundamentals of individual securities and free-ride on the work of active investors with implications for financial stability, price discovery and index correlation, according to a paper from the Bank of International Settlements.
New Morningstar data shows that around 16% of European assets invested in funds were held in passive strategies in January 2018, much less than many had expected.
European active equity funds saw a turnaround in net flows during 2017, enjoying a rise of €135.8bn in net new money to €62.7bn, after suffering an outflow of €73.1bn in 2016, according to Morningstar data.
The active versus passive debate could be history by 2025, according to Blackrock’s Joe Parkin.
Everyone has heard about the bitcoin bubble; Neil Woodford has warned of a new tech bubble; and now investors are voicing concerns about a passives bubble. But if such a bubble exists, is it ready to burst? Or will index funds continue to steal market share away from their active peers?
Europe’s passive funds will be given a boost in 2018 at the expense of active funds thanks to Mifid II’s drive for transparency on costs, according to research firm Cerulli Associates.
If fund managers seek to deliver consistent alpha, they’d better refrain from pushing too many buttons, says Rob van Wechem, head of investments at private bank Oyens & Van Eeghen in Amsterdam.
As the number of passive products in the emerging markets space increases, active fund managers need to outperform to justify their fees, argues a report by Cerulli Associates.
The last 10 years have seen ETF products grow from pre-teens to fully fledged adults, even dabbling with drugs along the way. 7IM’s passive expert and senior investment manager Peter Sleep looks back at the biggest trends.
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