Pretoria News Weekend - - OPINION -

PAS­SIVE funds are not new. El­ize Botha, the man­ag­ing di­rec­tor of Old Mu­tual Unit Trusts, says the first in­dex-track­ing funds were launched in the United States in the mid-1970s, and ex­change traded funds (ETFs) were launched in the US in 1993 as an al­ter­na­tive to tra­di­tional in­dex funds. How­ever, what is rel­a­tively new is how pas­sive in­vest­ing has caught on with in­vestors.

Botha says: “Glob­ally, the as­set-man­age­ment world is see­ing a mas­sive shift to­wards pas­sive in­vest­ing, with the US and Ja­pan lead­ing the charge. Re­search by Moody’s In­vestors Ser­vice sug­gests that in­dex funds will have more than half of the in­vest­ment-man­age­ment busi­ness in the US by 2024, up from the cur­rent 30%. Ac­cord­ing to Bank of Amer­ica Mer­rill Lynch, in Ja­pan, nearly 70% of the as­sets un­der man­age­ment of Ja­pan­fo­cused eq­uity funds are pas­sive, mainly ETFs.

“In South Africa, we have also seen a rise in the num­ber of pas­sive funds and now have ap­prox­i­mately 100 pas­sive unit trusts and over 50 ETFs.”

Botha says a pos­si­ble rea­son for the take-up of pas­sive in the US is the tax ad­van­tage that ETFs of­fer by way of lower de­ferred cap­i­tal gains tax, which is not the case in South Africa.

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