Institutional Investors Revolt

The June 22 issue of The Wall Street Journal has an article about institutional investors, such as pension funds, that are increasingly unhappy with the results delivered by active money managers. Since so many of these money managers racked up spectacular losses in the recent bear market, their clients understandably fail to see the value added. As a result, a growing number of institutional investors are switching to low-cost index funds. The article indicates that about 20% of institutional investors responding to a recent survey have done so, up from around 4% in a survey last fall. If this trend continues, there are broad implications for the money management and securities analysis fields, probably losses in headcount and job opportunities. Keep an eye on this development if you are in these fields or considering entering them.