Active management’s well-documented decline has been mainly in the number of active funds available, not in assets under management (AUM), which have grown.
The number of active managers declined by over 20% from 2007 to 2018, whilst the number of passive managers rose from 12% of all managers, to 20% over the same period, according to a market report by Jefferies’ Prime Brokerage spanning ten years of data.
Back in 2007 active managers represented 53% of the overall market, but now account for only 30%.
Despite this, active funds have continued to grow in terms of AUM, increasing from $2.5 trillion (€2.2 trillion) to $4.5 trillion.
Passive funds, however, have grown at a much faster rate. In 2007, passives held $700 billion in AUM. Eleven years later, they had nearly caught up with active funds, managing a total of $3.9 trillion of assets, according to the report.
Other findings were that high-frequency trading has increased, now making up 50% of daily volume traded, up from 30% ten years ago.
Also, the majority of equity trading today is algorithmic, while in 2003 over 80% of the average daily traded volume in equity markets was non-algorithmic.
The research found that in the US the number of listed companies has nearly halved over the last 20 years, whilst the number of investors has grown.
And the report also notes that dark pool trading has increased from 2% in 2006, to 15% in 2018. Dark pools, a type of alternative trading system, allow investors to trade without exposure until after the trade has been carried out.
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