Fund flows out of passive ETF strategies may signal changing investor preferences

EXCHANGE traded funds (ETFs) have been a favoured vehicle for passive investors seeking a low-cost method of buying into a broad basket of equities. But in extreme periods of market volatility – such as the current environment in which markets are being roiled by fears of stagflation and rocketing interest rates even as geopolitical tensions simmer – is it time for actively managed funds to shine?

“We may be at a tipping point,” said Stephen Dover, chief market strategist and head of Franklin Templeton Institute.

After enjoying decades of declining interest rates, generally tepid inflation, and increased global integration of supply chains, labour markets and capital markets, Dover noted that investors are now facing a rapidly changing climate.