66% of pension fund managers cite passive investments as established part of portfolio

A total of 66 per cent of pension fund managers regard passive investments as an established, mature part of their portfolio, DWS has reported.

According to a DWS-sponsored report, Passive Investing: reshaping the global investment landscape, the majority of pension funds now view passive investments as a “mature” part of their portfolio.

The analysis, which looked at over 150 pension plans globally found that the average pension fund holds 32 per cent of investments in passives or solutions in the form of either index funds, passive funds or exchange-traded funds (ETFs).

While passive investments are growing in popularity, however, only 10 per cent of surveyed respondents expect passive investments to replace active. The majority of managers expect both active and passives to co-exist in pension portfolios.

Almost half, 48 per cent, of respondents also agreed that passives are being used to access specialist asset classes, secular investment themes and cyclical risk factors.

Moreover, the survey, conducted by Create Research, highlighted that almost 50 per cent of pension funds plan to increase their passive ESG allocations by more than 5 per cent of assets under management.

It was noted that there has been a noticeable shift from market capitalisation-weighted indices towards smart beta, factor-based, ESG and other thematic strategies.

DWS co-head of global coverage group and regional head of asset management, EMEA, Thorsten Michalik commented: “Over the last decade we have seen a fundamental reshaping of asset management, with some strategies becoming standardised and made easily accessible at low cost, which means investors today have an unprecedented level of choice to help them meet their asset allocation goals.”

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