A Prediction for the Future of Active Management

Laurence Articles

What effect will the index fund revolution and the Department of Labor’s (DOL) fiduciary rule have on active managers? The data shows that active management is still a healthy business model. But industry consolidation is coming and advisors will need to change the way they construct portfolios.

Indexing is a very low-fee business, with the standard-setting fund Vanguard Index 500 Admiral Class (VFIAX) charging a tiny 0.05% of the investor’s asset balance per year. Active managers typically charge a fee some 20 times higher, around 1% per year, although fees for some popular actively managed funds have come down; the popular fund Fidelity Contrafund (FCNKX) has a net expense ratio of 0.70%.

Click Here to Read the Article