More surprisingly, high-yield debt has also proven a tough nut to crack for ETFs and the like.Īnd then there is alternatives: a growing part of DFM portfolios, and an asset class that naturally lends itself to a more hands-on approach.

That’s most notable when it comes to strategic bond funds - none of which are passive in nature. Index-tracking products have made more headway in the fixed income arena, but there are big active bulwarks here too. But that's more apparent in developed markets than other regions: Asian and EM equity fund selections still tend to be based on an active approach, for example. Outside of income strategies, it's clear that passives have made major inroads into selectors' structural preference for active equity funds. Overseas equity income remains a predominantly active hunting ground, too. As we’ve discussed in the past, there’s been very little sign that the major passive UK income strategies have been capturing more investor attention of late. One such area is equity income: hardly a minor part of discretionaries’ asset allocation. That’s due to the pressures imposed by the likes of Mifid II, among other factors.īut there are still plenty of areas within the fund selection universe that remain relatively immune to the charms of trackers and ETFs. And lofty predictions are still being made for their future importance.īlackRock - while not exactly an uninterested observer in such things - predicts that the proportion of UK wealth assets held in passives will rise from 20 per cent to 30 per cent in the next two years alone. Whatever the impact in terms of returns, it's clear that passives' prominence in DFM portfolios is on the up. Wealth firms' own performance figures might favour passives for now, but some might need more persuasion that the same will hold true over the coming months and years. Generally speaking, however, the lower-cost route has proven most effective: all other passive or blended portfolios have beaten their active-leaning peers.įor some, this might be a warning sign: given DFMs are typically more predisposed to favour active holdings than trackers, their core activity sits in an unflattering light on a one-year horizon.īut any further shift towards lower-cost, passive-heavy offerings might be stymied by concerns over markets' fate in the coming months. In a handful of cases the passive-leaning portfolio has fallen down: as the left-hand side of the chart shows, three have underperformed their active equivalents, all by at least 2 percentage points.

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