Boston-based research firm Cerulli Associates is putting its money on a major trend which will see passive exposure in advisor-managed holdings jump to approximately 37 percent by the year 2020.
That's a quantum leap from the current level of involvement, a tribute to a market that Cerulli notes is still full of shell-shocked investors who are seeking better solutions in lower-risk venues. The data comes from the fourth-quarter issue of "The Cerulli Edge, Advisor Edition."
"In 2011, passively managed funds accounted for 20 percent of mutual fund and ETF exposure," said Tyler Cloherty, senior analyst at Cerulli Associates.
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Cerulli's research reports that alternatives and emerging markets are the latest sleeves within many advisor portfolios, a trend driven by the opportunity for diversification benefits and growth opportunities. Many advisors indicate they use passive and active managers as complements to one another.
"Overall, advisors are favoring passive options, with sector allocations receiving the largest new flows," adds Cloherty. "There is a transition toward lower index options as advisors are seeking to regain control over their clients' portfolios. ETFs and passive investments synced well with advisor demand due to their low cost, liquidity and ease of trading."
There's still something to be said for a balanced share between active and passive funds, especially with market rebounds on the horizon.
"We expect active managers will continue to retain significant share within advisor portfolios. Nearly 50 percent of advisors still believe that active managers can consistently outperform," Cloherty said. "There is an opportunity for asset managers to compete where new money is going by positioning themselves within growth markets."
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