Thirty years ago, the investment department was largely boutique, as the fund managers have gently agreed to transfer their wisdom to customers for a huge annual fee.

These were great days for stars. I met Jeff Vinik in 1995, then managed the largest joint box in the world, Fedelity Magellan. He left me that the fund added one billion dollars in that morning. Good news to enter sincerity.

At that time, a large number of fund management groups managed to earn a decent living, with anything that dominates the market. In fact, this was partial because the performance was not far from being random. This has succeeded in favor of managers, as they will always have a few money that surpasses the market. These optimistic customers who were hoping, despite the evacuation of organizational responsibility, the previous performance will be evidence of the future.

But all this has changed. Over the past three decades, the asset management industry has undergone a revolution. The sector, which is proud of its experience, has become a commodity work. Inevitably, the fund managers are trying to adapt to this revolution by introducing new products. But while these innovations may seem like great opportunities for investors, they may turn into an expensive trap.

The revolution was driven by economic reality: customers have gradually woke up to the fact that negative funds, which follow a mere indicator, give them a simple and simple way to invest in the chapters of the main assets. In the United States, managed funds have grown only 19 percent of the market in 2010 to the inclusion of the majority of the market in 2024. The trend is unable. Morningstar found that the cheapest five money in 2023 witnessed net flows of $ 403 billion, while the rest of the sector suffered from external flows of $ 336 billion.

This means that the drawings paid by customers have decreased significantly. The research conducted by Morningstar found that the average weighted annual fees for the assets paid by American investors from 0.87 percent in 2003 to 0.36 percent in 2023. Given that the United States industry runs about 30 trips in joint investment funds and the exchange funds on the stock exchange (with the exception of money market funds and money funds), this is to save (compared to 2003) From 2003 billion dollars.

This should be one of the largest economic gains and the least-grade to consumers in modern history-it is clear that it is in a better position under the new system.

For fund managers, the result was a Druze struggle, as staying alive went to cheaper. Tracking the index generates savings. It does not cost much to manage a fund worth $ 10 billion from a billion dollar fund. Therefore, the industry has united. In the world of funds circulating in Exchange (ETFS), the first three managers (Blackrock, Vanguard and State Street) control nearly two -thirds of all assets, according to LIPPER, financial data service.

It was an inevitable battle. One of the largest trends in this industry is the launch ETFS is activeWhich has higher fees. Active ETFS earns 0.4 percent annually (using a weighted average of assets in the industry) about three to four times the typical negative boxes. Goldman Sachs Firing Actively traded investment funds in February and Cerulli Associas say 91 percent of ETF managers are planning to develop an active product.

There is a large percentage of active traded investment funds, which include about $ 2.76 million of assets, according to LIPPER, in the field of factors based on factors, or “smart test version” in industrial terms. These stocks are specified based on a set of financial characteristics. The value, the traded investment funds choose shares with a high profit return or a low price for their asset value, for example. Investment funds are chosen for the recently increased price funds. In some sense, such funds are trying to exploit the inventory visions used by traditional fund managers in a systematic way. The average fee on such funds is 0.18 percent annually, or about half the level that other active funds receive.

These investment patterns can look proper instinct; In the case of valuable stocks, buying shares appears to be “cheap”. The problem is that the strategy can be low for very long periods. A study at UBS GLOBAL Investment RTURNS YEARBOK 2024, by ELROY DIMSON and Paul Maric and Mike Streeton, found that UK shares appreciate their growth counterparts from 1987 to 2020.

Consequently, it remains to see whether the active traded investment funds will be more likely to outperform the market than joint investment funds. Mathematics make it unlikely. The index represents the performance of the ordinary investor, before the fees; Therefore, after the fees, the normal fund manager cannot expect to overcome it. For a retail investor, it seems that the purchase of ETF is active is the victory of hope for experience.

Whether the active traded investment funds replace negative funds in investor portfolios, they are another issue. It may be good that they are taking the place of investment funds that they actively run instead. This is part of the public shift away from the joint investment funds and towards the investment funds circulating in recent years. “Investment funds are essentially dealing with investment funds at a rate of even the most fans of ETF have been surprised,” says Michael Oureuardan, the founding partner of Blackwateer, a consultant. According to Oliver Wayman, Adviser, ETF assets grew by 16 percent annually between 2016 and 2022, compared to 5 percent of traditional investment funds. In the United States, ETF assets grew from only $ 66 billion at the beginning of 2001 to $ 10 million at the end of last year. The global ETF origins were more than 14 Train. Zachary Evens, a research analyst at Mooringstar, says that the circulating investment funds are generally less expensive than joint investment funds, more transparent (meaning that investors can see their basic holdings) and can be traded daily.

ETFS is not the only alternative to retailers. ETFS based on derivative option is used to provide a different type of return. One set of traded investment funds reinforcing the box by selling call options on stocks in the wallet. These calls give other investors the right to buy these shares; On the other hand, ETF earns a distinct income. The effect is the creation of a higher income stock box, but with the high level of difficulty (if the shares are in high prices in the wallet, the calls will be practiced and the ETF will have to sell these securities).

The second type of ETF option is called the temporary store box. In these boxes, managers buy mode options that give them the right to sell shares at a certain price. This limits the amount in which ETF can decrease in the price. But buying costs puts money and compensates for this cost, ETF managers sell calls to stocks. This limits the upper direction of the fund as well. Therefore, insulating funds provide a narrower set of returns, which may attract the most cautious investors.

How should investors see these assets? The goal of investing in stocks is the possibility of long -term returns. Supreme income in the short term can be achieved by combining stock assets and government or companies, or with deposits. Many investors will do this already. Consequently, the allocation of various assets can provide a higher return, along with the boundaries of the bullish direction and the negative aspect of the returns provided by ETFS option -based. DIY option for investors may be cheaper. The numbers from Morningstar show that fees on the trading boxes based on options range from 0.66 to 0.82 percent annually depending on the box type, much higher than the fees imposed by negative funds.

The ETF sector may be seen as a ripening industry where the primary product is to be refill to give consumers a much wider option. Whether this choice is in the interest of consumers or producers another. Starbucks is virtue of its ability to provide a wide range of caffeine drinks. Consumers can request Java Chocolate Frappuccino with whipped cream if they wish. Whether this is the best value, or in reality, it is the healthiest option, it is another issue.

One of the options that have become less popular recently is the Esg sector (environmental, social and governance), which is the modern version of what was called ethical money. There was a major shift from this school of thought in the United States, especially after President Trump was elected. Corporaate America is scrambling to drop its focus on diversity, fairness and integration; It is supposed to focus on monotheism, inequality and exclusion. The speed of this reflection is due to the minds of the old Groucho Marx Quip: “These are my principles, and if you do not like them, I have others.”

Before Trump’s re -election, ESG funds were more popular in Europe than the United States. Europe makes up 84 percent of all sustainable money, compared to only 11 percent in the United States. This indicates that the sector will not disappear; There were $ 54 billion of flows last year, according to Virus.

There is a respectable case for the argument that ESG funds can excel in the long run; Companies that harm the environment, acts in a non -moral or bad manner in their operation, may make mistakes from the organizers and courts or be a victim to change consumer morale. They overcame other money during some time periods; In the five years to finish 2023, for example. But it involves a large sector bets. It tends to be weight loss and weight gain in technology and health care, for example.

Last month or so, it appears We have declined From its security commitment to Europe, it means that there is a significant increase in European defense shares; Something does not pick up ESG funds, which avoid defense. Moreover, while the fees that sustainable funds have decreased by a third over the past ten years, they are still higher than 0.52 percent, which are higher than the average active box.

A new possible new choice for retail investors is private credit. This is the debts that are not traded in the public market, unlike corporate debts. The largest part of this debt was issued by private stock companies to finance the purchase of companies that make up their governors. This religion can be very high, and this can achieve decent returns; Institutional private credit funds have made two -digit returns in 2021 and 2023, for example.

But this asset category, by nature, is not liquid, and therefore there was no launch after ETF specialized in this sector. It is only possible that only high net value customers can exposure. They should be aware of two warnings. The first is that the money that invests in private credit tends to be issued by the same private stock companies that make debt; This is a possible conflict of interests. Second, in the event of a stagnation or a continuous rise in interest rates, private credit, such as any other high -yielding debts, may suffer from the failure to pay.

The latest global stability report in the International Monetary Fund warned: “Some medium companies that borrow the high interest rates in the private credit markets have become increasingly tense and resorted to payment methods, postponing interest payments effectively and accumulating more debts.” The report also warned that the competitive pressure in the sector was leading to the deterioration of the weakest and weakest methods (where borrowers agree to the financial conditions).

Industry offers many new options to lure investors away from low -cost indicators that have begun to control the market. Some may appeal to investors looking for diversification in their governorates. But there should not be a rule far from the minds of these investors; The higher returns are not confirmed, but the higher fees.