Watch out for lots of fireworks from the passive funds sector in 2014. Big changes are on their way, with this fast growing segment of the funds market pushing its way relentlessly into the retail heartland.
The first change is already under way and involves outfits such as Seven Investment Management (7IM). The fate of passive-oriented shops such as this is entirely based on just two factors – their ability to enhance beta and their low cost structure. In the last few months, these drivers have prompted the firm to switch strategy and focus less on exchange traded funds (ETFs) and more on passive futures and stock baskets as a way of replicating an index. Futures and baskets cut out the ETF middle man and also allow the asset manager to specify exactly what is that they want from an asse...
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