It won’t silence critics of the indexing boom, but S&P Dow Jones Indices reckons passive investing has saved traders a tidy $357 billion over the past 25 years.
The firm estimates that managers with assets linked to the S&P 500, 400 and 600 indexes have had their expenses cut big time—helping returns in a world where stock pickers keep failing to outperform benchmarks.
It has an admittedly vested interest in touting the virtues of all things passive, but the calculations are a reminder of the power of the industry 50 years after the birth of the first-ever index fund.
“In the 20 years ending in 2020, 94% of all large-cap U.S. managers lagged the S&P 500,” Anu Ganti, senior director of index investment strategy, wrote in a blog post this week. “As indexing has grown, investors have benefited substantially by saving on fees and avoiding underperformance.”
The figure is actually conservative because it excludes myriad other indexes, including from other major providers such as MSCI Inc. and FTSE Russell. Bloomberg LP, the parent of Bloomberg News, is also a competitor.
And as Ganti notes, for all their growth, indexed assets only accounted for 17% of market capitalization in 2020—leaving plenty of scope for expansion.
This article was provided by Bloomberg News.