Table of Contents
Despite announcing his death in the headlines, active investment management is not getting extinct – it is developing. Traditional mutual funds may be extinct, but making active decisions now shine through new channels: model portfolio, direct indexing and self-survises apps. Whether it is a retail investor a separate managed account (SMA), an advisor allocated in ETF, or an advisory selecting special managers to meet various investment policy requirements, the index is no longer the limit between inactive and active-this is the initial point to make active decisions.
Investment management, finally, is to decide as a service. What is changing who (or what) is making which decisions, which devices are being used to make them, and those decisions – and their results – are being distributed to the customers. While traditional active mutual funds have seen a truly important outflow – $ 432 billion in 12 months by 31 March 2025 – they have not disappeared from the market. According to Morningstar’s US Fund Flow Research, they have been largely rotated in passive vehicles, which were taken to $ 568 billion in the same period. On the surface, this change supports the “passive acquisition” story. But this actually shows a re -combination where and how active options are being expressed.
Below the surface, taking active decisions is more wide, more diverse and more structurally embedded than before in the investment scenario.
Under the surface
Active decision making packaging has developed beyond traditional mutual funds. Combined trading apps with near-zero transactions costs have created a bounce in self-directed investment, as the 2024 American investors of Broadridge explain pulse studies, spreading all generational colleagues. These self-directed investors focus on ETF and direct equity rather than mutual funds.
Meanwhile, until June 2024, 79% of American equity investors maintained investment relations with a financial advisor. These advised assets are also transferring from mutual funds to ETFs and direct equity, which is easier by the spread of SMAS and Integrated Managed accounts (UMAS). SMAs, in particular, offer unprecedented levels of access, transparency and tax efficiency to individual investors through strategies such as tax-deduction. In other countries, the trend is the same: self-service and privatization of investment solutions on scale.
Source: Broadrid US Investor Pulse Studies – June 2024
Either way, someone – or something else – is taking active decisions.
Self-directed investor wants control over hands. They are active according to the definition, but are not ready to pay the third party to make decisions. Apparently, they either believe that they can improve professionals, they do not give importance to the entertainment of market participation, or do not take care of both.
Advice-channel investor, by contrast, has outsourced his financial advisor to make decisions, believing that a professional would provide better results. Financial advisors have never been more scalable as a business, partly because they can easily outsource real investment decisions for an extended universe of model portfolio, from strategic asset allocation models to strategic thematic strategies from strategic thematic strategies. These portfolio involves making the same active decisions found in mutual funds, without business execution services.
Institutional allocation gives importance to alpha and will pay for it. As the index has focused rapidly, these sophisticated investors are turning to active managers for diversification. But today’s allocation is easily seduced by previous performance; They demand evidence of skills.
The industry is responding to these changes. Active equity portfolio manager, operated by cost cuts, is re -evaluating the division of labor within their investment teams. Product strategists are evaluating rapid volume and fundamental strategies, which are applied fresh eyes to consolidation of multi-brand product range. In leading firms, silent investment teams in the past are being integrated to promote cooperation and cross-pollination of ideas. This approach emphasizes the quality of decision making, whether the signal arises from the human insight or algorithm.
key takeaway
Surface-level data suggests that the active fund management retreat has an industry: in dollars and passive options exiting active funds. But below the surface, taking active decisions is more wide, more diverse and more structurally embedded in the investment scenario. The imperative for active managers is no longer conservation, but adaptation. In a market that demands individualization, transparency and demonstrator value, the relevance depends on the new delivery mechanisms and embracing decision -making structure. The future of active investment will be shaped by those who develop with it – quietly, strategically and decisively.
More to think from CFA Institute Research and Policy Center
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Active and passive investment beyond: optimization of finance
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