CATALYST FUNDS RESEARCH
A Potential Passive Investing Bubble: High Active Share Investing
July 2018 |
- Billions of dollars are flowing into passive funds and out of actively managed funds.
- 10 stocks are contributing 116% to the S&P 500 TR Index return while the remaining are contributing -16%, as of 6/30/2018.
- History may not repeat, but it rhymes.Investors should be concerned about exposure to FAANG stocks.
- Historically, investing in high-conviction, high-active share funds has resulted in decreased portfolio volatility and outperformance relative to benchmarks.
So how did we get into a potential passive investing bubble?
Flows into passive funds have grown by 25% annualized since 2011, culminating in $692 billion flowing into passive funds in 2017.
The Creation of a Potential Passive Bubble: U.S. Fund Flows ($ Billions) into Active and Passive Funds Since 2006
Source: Morningstar Direct. Inflows based on flow of U.S. money into passive and active funds between 2006 and 2017.
Past performance is no guarantee of future results. The referenced indices are shown for general market comparisons and are not meant to represent any fund. Investors cannot directly invest in an index; unmanaged index returns do not reflect any fees, expenses or sales charges.