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The number of passively managed index funds has exceeded the active funds’ ownership of the U.S. stock market for the first time ever, according to a report in the Financial Times.
The latest data by the Investment Company Institute showed that passively managed funds account for 16% of the U.S. stock market’s cap at the end of 2021, compared to 14% owned by actively managed funds.
This marks a drastic change in the ownership from 10 years ago when active funds owned as much as 20% of the U.S. stocks, compared to only 8% held by passive funds. Over that period, the market has recorded a net flow of over $2 trillion from active funds to its counterparts, particularly exchange-traded funds (ETFs).
The unprecedented rise of index funds has significantly driven the concentration of ownership.
According to the Investment Company Institute data, the five biggest mutual fund and ETF sponsors accounted for 54% of the market’s all assets last year, marking a sharp jump from just 35% in 2005.
The 10 biggest funds represented 66% of all assets, up from 46% in 2005, while the top 25 funds accounted for 83%, up from 67% 17 years ago. The number of assets owned by hundreds of managers outside the top 25 has halved since 2005.
