This report describes the competitive landscape for passively and actively managed funds from 2011 to 2020 in Canada, the United States and around the world.

In 2020, Canadian passive funds increased their market share from 12.0% to 12.9% on the back of a record inflow of $24 billion1. Meanwhile, Canadian active funds attracted $26 billion. We estimate that Canadian passive funds posted a weighted average Management Expense Ratio of 0.28%, compared to 1.55% for active funds. In the U.S., passive funds increased their market share from 39% to 40%. U.S. passive funds attracted $346 billion, while active funds experienced a $130 billion outflow. Worldwide, passively managed funds increased their market share from 27% to 28%, backed by inflows of $655 billion. Meanwhile, positive net flows into active funds were almost twice as large, at $1.15 trillion.

Since 2011, Canadian passive funds have increased their market share from 8% to 13%. During that time, passive funds attracted a cumulative $107 billion in net new money compared to $165 billion for active funds. During the same period, U.S. passive funds have increased their market share from 22% to 40%, and attracted a net money flow of $3.8 trillion, compared to a $445 billion outflow for active funds. Worldwide, passive funds have increased their market share from 13% to 28%. Over ten years, passive and active funds had similar cumulative inflows of $5.6 trillion and $5.8 trillion, respectively.

In short, passive management remains dominant in the United States. In Canada and elsewhere in the world, the trend towards passive is fifteen to twenty years behind the United States. This is perhaps explained by a more competitive investment industry and a stronger culture of passive investing south of the border. Lagging behind the U.S. market is costing Canadian investors, as actively managed funds remain on average 82% more expensive than their passive counterparts.

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