This chart should terrify stock pickers everywhere

pulse

February 2, 2017 9:24 PM

Passive investing is set to overtake active management in US market share in just four to seven years.

Screen Shot 2017 02 02 at 2.33.20 PM

passively managed funds will have more in assets than active funds by 2024 at the latest.

Moody's reached its conclusions using two approaches: a linear regression of market share versus time and by fitting recent passive fund AUM data to a diffusion model which projects near-term market share.

The Moody's team led by Tu also see huge potential in growth outside of the US. The rest of the world has seen a smaller penetration of passive investing at approximately 5-15%, according to the report, due to less awareness of passive products or sales practices that don't favor investors.

Moody's believes that as markets mature and investors become more aware of the products, there is huge potential for upside.

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