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Can Artificial Intelligence Rescue Active Fund Managers from Staggering Market Share Losses to Passive Funds?

The relentless shift to passive investing is challenging active investment managers to embed Artificial Intelligence throughout their business model to improve alpha and reduce expenses.

Can Artificial Intelligence Rescue Active Fund Managers from Staggering Market Share Losses to Passive Funds?

The relentless shift to passive investing is challenging active investment managers to embed Artificial Intelligence throughout their business model to improve alpha and reduce expenses.

 

 

Passive Investing Pressures

Historical returns and management fees are key factors when selecting passive over active investment strategies.

 

Per Morningstar Direct, this past August passive stock funds surpassed active stock funds in total AUM market share.

 

Standard & Poor’s annual SPIVA report shows that 85% of all US Equities Large Cap Funds did not beat the S&P500’s returns over a 10-year period. Mid Cap and Small Cap funds fared similarly.

 

According to a Morningstar article the average active manager fund fees were 3x higher than passive fund fees.

 

Collectively, these issues have led to the perfect storm that even the best active fund managers in the business cannot circumnavigate.

 

Is there a safe path through this storm or will passive strategies sink the ship?

 

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