Active Fund Managers Seeking to Benefit from Passive Trends; Buoyed by Recent Performance

As investor cash continues to pour into passively managed investments active fund managers are looking for ways to profit, the Wall Street Journal reports. Active managers are observing factors such as the percentage of a stock owned by ETFs and index funds and money flows into and out of such funds as they decide whether to buy or sell shares of a company. For instance, a Wall Street Journal chart showed that after the 2016 U.S. election financial stocks in sector ETFs outperformed financial stocks that were not included in those ETFs. Industry participants quoted in the report acknowledged both drawbacks and benefits for individual stocks that are owned by indexes. Academic research is still evolving on the topic, the report said. Meanwhile, the Financial Times reports that although passive funds have outperformed the active sector, tighter monetary policies have of late yielded good results for active managers and that lower fees, the culling of weak portfolio managers and the mergers or shutting down of weaker performing funds may be contributing to improved performance. According to the report, stock pickers see the current atmosphere as advantageous and ripe to differentiate themselves because of lower correlations between individual shares and the broader stock market that have long prevailed. Separately, the Investment Adviser Association, a trade group representing investment advisers, pension plans and other asset managers, plans to launch a council dedicated to defending active money management, the FT reported.