Passive Investing Returns to Vogue, Goldman Says

Low fees and market returns bringing investors back to indexing.

Reviewed by: Zoya Mirza
Edited by: Zoya Mirza

Passively-managed funds—those that track indexes without the guidance of a financial pro—are returning to favor as investors shy away from more expensive, active funds, according to recent Goldman Sachs Group Inc. research. 

“Flows into passive products remain above average though have slowed in recent months,” Goldman Sachs researchers wrote in a Nov. 22 note, which also said that 55% of assets under management from exchange-traded funds and mutual funds is passively managed as of Oct. 31.  

The recent shift back toward passive investing comes after the worst stock market performance since 2008 sent investors scurrying to higher-cost, actively managed ETFs this year in hopes that professional managers would beat the market and provide better returns. JP Morgan said in a June note that actively-managed funds had taken in 62% of new money in the year ending in May, while passive took in 38%.  

“Investors turn to passive funds as a low cost and reliable source of market returns,” Peter Sleep, senior portfolio manager at London-based 7 Investment Management, wrote in an email to  

Higher-cost active funds may be acceptable to investors had they beat the market, Sleep said. Instead, they underperformed. 

“Sadly, the only thing that is predictable with active funds is that they underperform the market,” he wrote. “Investors therefore turn to passive funds as a low cost and reliable source of market returns.” 

Currently, passive funds outnumber active: data shows 2,082 passive ETFs and 986 active ETFs in the U.S. 

The biggest passive ETF is the $379.4 billion SPDR S&P 500 ETF Trust (SPY) which charges a 0.09% management fee. The biggest active fund, the $22.2 billion JPMorgan Ultra-Short Income ETF (JPST), has twice the expense at 0.18%, according to data. 

Passive began overtaking active as far back as 2015, when their assets surged 11%, according to a March, 2021 Bloomberg Intelligence study. They grew to $10 trillion by the end of the year. Passive surpassed active in August 2018, eight years sooner than expected, the study noted.  

Contact Zoya Mirza at [email protected] 

Zoya Mirza is a markets reporter at Her work has appeared in USA Today, Voice of America, and United Press International, among others. Mirza is a graduate of Northwestern University’s Medill School of Journalism. Her past experiences include editorial work in book publishing and conducting political analysis for NGOs and think tanks. Mirza is a passionate bibliophile and collects vintage postcards from every bookstore she visits in a new city.