Beginning Tuesday, approximately 600 financial advisors and institutional investors will be gathering in Chicago to attend Morningstar’s sixth annual ETF conference. The event, which runs through midday Thursday, will focus on three key areas of ETF investing — strategy, tactics and managed-portfolio solutions — which will be discussed in more than 20 different sessions.
“We’re looking to have good conversations that rethink conventional wisdom to better navigate the current environment,” said Ben Johnson, Morningstar’s director of Global ETF Research, who was in New York for a Research Roundup conference.
On example: a session early Wednesday morning called “Deactivating Active Share,” presented by Andrea Frazzini, of AQR, which will explore why “the concept of active share has “very minimal usefulness,” said Johnson. The concept is a popular one that advisors and others use to differentiate between those funds that are truly actively managed and those funds that present themselves as such but are in reality “closet” index funds.
It’s also related to one of the most popular debates among advisors: whether to invest in actively managed funds or in passive ETFs or index funds, which will be debated by a panel hosted by Johnson. While active fund assets still outflank ETF assets, the margin between the two is narrowing because money is flowing into passive ETFs and leaving active funds.
Morningstar’s latest report on U.S. asset flows shows that for the 12 months ended August 31 active funds lost a net $133.6 billion in long-term assets to outflows while passive funds gained more than twice that much: $467.5 billion. U.S. equity funds led the exchange: $152.4 billion left active funds while $145 billion flowed into passive funds.
“We are in the middle of a prolonged cyclical uptick in the adoption of index funds,” Johnson said.