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Thursday, August 21, 2014

The Money Keeps Flowing Into Index Funds and ETFs

WSJ today reports on the explosive growth in assets at Vanguard--as well as Dimensional Fund Adviors, ishare(Blackrock) s and spdr (State Street) ETFs

Investors Pour Into Vanguard, Eschewing Stock Pickers

Investors are pouring money into Vanguard Group, the epitome of the hands-off approach to investing, flocking to funds that track market indexes and aren't run by stock pickers or star managers....
he surge is part of a sea change in the fund business in which investors are increasingly opting for products that track the market rather than relying on managers to pick winners. Other firms, such as New York behemoth BlackRockInc. BLK +0.18% and Texas-based Dimensional Fund Advisors, are also enjoying an influx of cash.....

It is "a trend that I see continuing on, probably forever," said David Barse, chief executive officer at New York-based Third Avenue Management, which manages $13.5 billion. He said the challenge for active managers, like his firm, is to identify overlooked investments that don't merely track the broad market.
But he acknowledged that is increasingly a tougher sell, particularly to retail investors.
Investors poured a net $336 billion into passively managed stock and bond funds in 2013, handily beating the $53 billion invested in traditional mutual funds of the same type, according to Morningstar. So far this year through July, investors put a net $177 billion into those passive funds, compared with $74 billion in actively managed funds

Vanguard isn't the only company benefiting from the wave of money flowing into passive products. BlackRock, the world's largest asset manager, with about $4.6 trillion in assets under management, has seen $53 billion pour into its iShares' ETF business globally this year through Aug. 18, the largest amount of any fund company, according to the company.
BlackRock is the largest ETF provider. A spokeswoman for the company declined to comment. Vanguard, however, the third-largest provider behind State StreetSTT +0.37% Global Advisors, has seen more investor inflows in the U.S

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