BlackRock’s Q1 2010 fund flows seem to have validated a position that I put forth 2 weeks ago, asking if active investment management has peaked. Based on BlackRock’s total net outflows of $31 billion, this indeed seems to be the case.
BlackRock reported that the flow of funds in their 1st quarter earnings announcement was impacted by institutional investors shifting from active to passive. In a related post, I proposed that active investment management may have peaked and outlined 4 factors which may result in Institutional Investors continuing their move towards passive investment managers.
It now appears that in 2010, the industry is seeing institutional investors continue to question the role active strategies have in their investments. BlackRock commented on their quarter and the institutional flows by saying:
“Following last year’s sharp rally in global equity markets and significant tightening of credit spreads, institutional investors stepped back to reassess their asset allocation strategies. As a result, institutional ‘re-risking’ activity slowed down and reallocations focused primarily on shifting from active to passive and from money market funds to deposits. Our new business results reflected these trends.”
One of the highlights mentioned by BlackRock showcases that factor to which institutional investors are concerned with high cost active management as well as continuing the trend towards ETFs:
“Globally, investors awarded us $18.2 billion of net new business in index equity and fixed income products and $13.0 billion in multi-asset and alternative investments, while redeeming $22.3 billion from actively managed equity and fixed income portfolios. While some of these outflows were merger-related, a greater proportion reflected a shift in clients’ asset allocation strategies given market outlook and interest in using index and exchange-traded funds to quickly and efficiently add and adjust market exposures.”
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