Evolving investment landscape offers index providers opportunity to shine

The markets are undergoing a period of profound change.

Continued economic globalisation, rising geopolitical tensions, tightening central bank policies and new technologies are combining with changing market structures and regulatory shifts to create a very dynamic landscape. As a result, buy- and sell-side participants alike are facing multiple challenges such as fee compression, a persistent shift toward passive investment and evolving business models for financial firms. And, ten years on from the financial crisis, all of us in financial services must continue our efforts to rebuild the trust in our industry.

These forces are changing the way our money is managed. Investment flows are predominantly into low cost passive funds: a recent report from professional services firm PWC predicts that global passive assets will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 20251. Active managers, some of whom have been accused of being closet index trackers, are having to take on more active risk to justify their higher fees and deliver performance that beats the benchmark in a meaningful way.

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