Academic research (Rabih Moussawi, Shen, Velthuis 2020) has revealed that tax efficiency is the main driver behind the migration in the US from active funds to ETFs.
Yet in everybody’s mind, it is obvious that high fees and underperformance are the main drivers of active fund outflows in the US. In light of the study, it appears that this statement can be added to the list of false beliefs in financial markets (see my previous series of posts on false beliefs). Even the researchers had this false belief in their minds as they were surprised by their findings.
Bringing clarity on this is helpful:
– to better understand the gap that we observe between The US & Europe concerning active equity flows (€119bn in Europe vs -€309bn in the US in 2020).
– to avoid taking wrong allocation decisions as investors tend to generalize and deduce from the US market their allocation decision for all over the world.
👉 Not relying on false beliefs and looking for reliable data and analysis helps taking more efficient allocation decisions in order to build outperforming portfolio. 🎯🚀
Marlene Hassine Konqui