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...“There was a huge outflow from ESGU and into QUAL as a result of BlackRock changing their weighting,” said Bryan Armour, director of passive strategies research for North America at Morningstar....
...She noted that more than $200bn in flows went to US-focused index equity ETFs with expenses ratios in the lowest quartile in 2023....
...He compared the S&P 500’s pricing with the MSCI EAFE index, which includes equities from 21 developed markets excluding the US and Canada....
...“Conventional wisdom says that ETFs are best suited for index-like strategies with low active share,” said Bryan Armour, director of passive strategies research for North America at Morningstar....
...vehicles such as exchange traded funds....
...Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, believed the procyclical switch was logical....
...Wall Street’s blue-chip S&P 500 index captured its highest share of global equity exchange traded fund flows for at least a decade last year, as the rise of the so-called Magnificent Seven reshaped benchmarks...
...Most global equity trackers dial this down to below 20 per cent, as shown by the chart of the MSCI All-Country World Index below....
...With $19bn being sucked up by Chinese equity funds (including mutual funds) alone, EPFR said: “The latest flows into China-mandated funds went predominantly to domestically domiciled ETFs as Chinese policymakers...
...In the 10 years to the end of June 2023, 77 per cent of actively-managed sterling-denominated UK equity funds had failed to beat the index and 95 per cent of global equity funds had done the same....
..., broad-based strategies, said Bryan Armour, Morningstar’s director of passive research for North America....
...But Bryan Armour, director of passive strategies research for North America at Morningstar, said that on closer inspection a slightly different picture emerged....
...Index funds are price takers, not price makers....
...The snag is that these funds using options will always underperform a simple strategy of buying and sitting tight in the underlying index, as long as it continues to rise....
...But each portfolio was measured against exactly the same global ex-US equity index — as were those of most of my peers....
...Upside caps therefore can differ widely as new funds are launched. At the start of 2022, the popular Innovator US Equity Power Buffer ETF had a 9 per cent cap....
...Retail investors have rushed back into riskier assets, with net inflows to equity funds of £2bn, including record inflows of £1.4bn into US equities, according to data from funds network Calastone....
...But for his long-term focus, with lots of pension fund clients, it does not nag loudly enough to demand action. “It’s hard to have a strong view right now,” he said....
...Bryan Armour, director of passive strategies research, North America at Morningstar expressed similar concerns....
...Morgan thinks the US Federal Reserve will probably pave the way to a soft landing for America and the world economy, but adds that there are risks of a crash in the event of increasing geopolitical instability...
...Yet some analysts have recently suggested the growth of equity exchange traded funds that incorporate options into their strategies may be artificially compressing the Vix....
...European institutions hold more than $11tn of US equities and debt last year, according to the Federal Reserve....
...“Even with recent interest in actively managed ETFs, index-based funds remain the core of most portfolios.”...
...Another factor driving the growth of ETFs is the active ETF boom, said Bryan Armour, director of passive strategies research for North America at Morningstar Research Services....
...They point to the rise of passive, index-tracking funds, which automatically pour money into the largest stocks....
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