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US managers rebalance product rationalisation efforts as advisers seek active and passive products 


Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry and imperative to the product rationalisation process, according to the latest from Cerulli Associates in the US.

In particular, product rationalisation decisions related to active and passive products are necessary as the industry debates how much marketshare passive assets ultimately will command, the firm says. While the movement from active to passive management has been strong over the past decade, there are signs it is slowing as asset managers seek to implement active management in vehicles outside of the mutual fund—producing grey areas as to what falls under the umbrellas of active and passive management. 

Recent years have seen an increase in the blending of active and passive management to reduce overall strategy costs. Financial advisers believe active and passive work hand in hand, reducing overall fees with passive investments while implementing active for certain asset classes. According to the research, 81 per cent of advisers believe passive investments help to minimize portfolio costs, 82 per cent believe active managers are ideal for certain asset classes, and 74 per cent believe that active and passive investments complement each other. Understandably, focus on fees and returns net of fees are a significant portion of the competitive positioning for passive management. “The focus on fees illustrates the need to pay attention to external factors as part of the product rationalisation process,” says Matt Apkarian, associate director.  

Rationalisation teams at asset managers will benefit by understanding where—and how—to blend management styles. “With vast amounts of data available today, the ability to predict addressable markets, demand, asset-gathering potential, resource requirements, and other criteria associated with product rationalisation now can be more fact-based than ever before,” says Apkarian. “Listening to distribution resources and intermediary partners should be an integral part of the product rationalisation process, as they both have insights and an element of control over changing demand within the industry.”

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