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The problem with passive shareholder voting

Recently, investors have started to embrace the idea that a broad-based indexing strategy is superior to picking stocks or active funds. Due to this, millions have abandoned active funds in favour of passive funds. Dorothy Lund examines the problems with passive shareholder voting

FS Jul Aug 2019 - Passive voting image Investors have begun to embrace the reality that academics have been championing for decades – that a broad-based indexing strategy is superior to picking stocks or actively managed mutual funds. As a result, millions of investors have abandoned actively managed mutual funds, or active funds, in favour of passively managed funds, or passive funds.

In 2018, US investors withdrew $174bn from active funds while investing $207bn into passive funds, continuing a trend that has been ongoing for several years. By the end of 2018, the amount of assets invested in US passive equity funds nearly equaled the amount in US active funds and it is predicted to surpass that amount any day now.