Can active management improve its performance given the increase in flows into passive management?

Abstract

While the debate between active and passive management has been raging for years, this study attempts to analyse whether the increase in flows into passive management has implications for capital markets, and if so, whether there are opportunities for active management to outperform passive management. In order to achieve this, a quantitative analysis has been carried out for the US market, both for funds investing in large-cap and small-cap companies. In addition, two wealth managers and an asset manager were interviewed to provide insight into the debate. Still, more research is needed to fully understand the implications and opportunities of increased flows into passive management.