Despite posting increased market share for the eight straight year in 2013, passively managed funds still have the potential to grow, note BMO analysts.

David J. Chiaverini and Richard Fellinger of BMO Capital believe rotation from fixed income to equities would continue in 2014.

Passive investments: 28% market share

According to the BMO analysts, passive investments, including indexed mutual funds and ETFs should remain popular with investors, despite garnering 28% of total long-term mutual fund and ETF managed assets. The analysts believe passive investments should continue to grow at the expense of actively managed funds.

The BMO analysts believe passives will continue to be preferred thanks to its low expense ratios, high liquidity of core products, and continued preference shown by fee-based financial advisors. The analysts believe such a trend would favor BlackRock, Inc. (NYSE:BLK) as it is a leader in managing passive investments.

Growth of passive investment

Rotation to equities


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