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The implications of passive investments for active fund management: International evidence

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  • Carneiro, Livia Mendes
  • Eid Junior, William
  • Yoshinaga, Claudia Emiko

Abstract

This paper investigates how the tremendous growth in indexed investments has affected active management in the equity mutual fund industry across 32 countries. Our findings indicate that the growing competition from passive funds does not reduce the fees of actively managed funds. Moreover, active funds do not increase their product differentiation by diverging more from their benchmarks when they face more competitive pressure from indexed products, though they do sometimes charge higher fees and reduce their activity. Thus, our tests indicate that indexed and active funds can coexist and attract different clienteles.

Suggested Citation

  • Carneiro, Livia Mendes & Eid Junior, William & Yoshinaga, Claudia Emiko, 2022. "The implications of passive investments for active fund management: International evidence," Global Finance Journal, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:glofin:v:53:y:2022:i:c:s1044028321000211
    DOI: 10.1016/j.gfj.2021.100623
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    More about this item

    Keywords

    Indexed funds; Exchange-traded funds; Active management; Competitive market; Fund fees;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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