Head traders at US equity asset managers are unprepared for a mass shift of assets from active to passive products, according to new research. A TABB Group study found almost $3 trillion has moved from discretionary stock-picking funds to index-aligned investment strategies over the past 10 years. However, a survey of senior traders revealed that despite 95% of US equity funds being impacted by this, the majority of managers do not have a strategy in place to counter the trend. Responses varied from 35% of those surveyed simply hoping the trend will change, to 11% attempting to reduce their cost structure. TABB Group’s study also found US active managers agree Europe’s MiFID II unbundling rules will force funds to rethink how they obtain and procure research. Over three quarters of those surveyed said they will be directly impacted by unbundling regulation, up from 66% the year prior. TABB Group analyst and co-author of the report, Valerie Bogard, explained the majority of firms will be forced to restructure the way they obtain research. “Larger funds are more impacted and more prepared than smaller funds. Many smaller funds have not even started analysing the impact of unbundling on their business. “The combination of the move toward passive investing, unbundling, and low volatility has the US equity institutional investor commission pool down 7.5% from 2015,” she said.
The majority of US equity asset managers are unprepared for the trend towards passive trading, according to a study by TABB Group . It revealed that almost $3tn had switched from active to passive funds in the past decade , but 35% of managers surveyed hoped the trend would change, while more than 75% were trying to reduce their costs. The study also found 66% of respondents would be affected by Mifid II unbundling regulations, up from 11% in 2016 . "Many smaller funds have not even started analysing the impact of unbundling on their business," said TABB Group analyst Mifid II .