Category : Distribution Strategy

Confronting Passification: Three Ways Forward For Active Managers

“Passification” is the process through which investment categories once dominated by active managers are being captured by index-linked strategies. To avoid being passified, active management business strategies can take three dimensions.

1. Focus on passive-resistant categories
2. Employ high “degree of investment freedom” strategies
3. Redefine the current passive-biased framework

Pick a Side: Investment Freedom, Flows and Fees

We applied our proprietary Degree of Investment Freedom framework to a broad category of fixed income funds and found a remarkably strong relationship between the direction and levels of flows and fees with the level of freedom employed by managers. At the extremes, active and passive funds have both been flow winners. The real challenge is avoiding getting stuck in the middle.

Want Scalability? Think Multi-Asset.

The middle is a tough place to be for investment managers these days. Once the lifeblood of large shops, narrow ‘core’ products have lost the interest of investors. The titan funds built in the 1990s and 2000s are in net redemption – well below their peak AuM levels. These funds are now part of a legacy book of business associated with a former era. Now the question for these funds is less about growth and more about retention.