Advisers’ passive use near ‘ceiling’: Schroders

The growth in passive investments may be approaching a “ceiling”, according to a survey of advisers conducted by Schroders.

The survey of 328 investment-focused advisers conducted during November found 61 per cent had added to passive investments in the past year, but 75 per cent said they were likely to have the same exposure in 12 months’ time.

Schroders’ managing director for UK intermediary Robin Stoakley, speaking at a company conference in New York, said the data may indicate that the growth in the use of passive investments may reach a “ceiling” in the near future.

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“Last year half of advisers were looking at increasing passives - that’s now 25 per cent,” Mr Stoakley said.

He added that even those advisers still planning to add to their passive investments generally did not foresee exceeding 25 per cent of their total client portfolios being invested this way.

Recent IMA statistics indicated that passive funds amounted to more than 9 per cent of total assets under management for UK-registered fund managers at the end of September.

Richard Romer-Lee, founder of research firm Square Mile Investment Consulting & Research, argued that the “ceiling” may not be as close as the Schroders research suggested.

“It still looks like there is something more there,” he said, pointing to US data showing 40 per cent of new money in the past 12 months went into index-tracking products.

Mr Romer-Lee added that the desire to drive down the total cost of investing for end clients could also continue to drive passive inflows.