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NEWSLETTER | 16 Jul 2021  

Are the largest passive asset managers really too big to fail?

institutional asset manager maddy taylor captioned.jpg A handful of the highest-raising investment funds are scooping the vast majority of all money invested in a month. On average, 87 per cent of monthly net investment flows go toward the top twenty funds alone, according to exclusive data from EPFR.

This has largely benefitted large passive managers, including BlackRock, Vanguard, and Fidelity, raising concerns that their funds are becoming “too big to fail”.

Central bank interventions to suppress market volatility have become increasingly common in the past decade, with Federal Reserve buying billions in corporate bond ETFs amid the coronavirus pandemic.

“The circumstances have aligned in a way that certainly favours the big ETF providers,” says EPFR’s director of research, who believes that their advantage is “only going to get greater”.

Meanwhile, Europe’s financial sector is being encouraged to show how it is working towards the goal of net-zero carbon emissions by 2050, with the bloc setting out new sustainability rules that aim to deter greenwashing.

Asset managers are warning that these rules could end up reducing financing to emerging market countries, where capital is most needed to fund the renewable energy transition. Pictet Asset Management and Ninety One speak out about the perils of divesting from high-emitting countries and sectors in a bid to reduce portfolio-level carbon emissions.

At the same time, large companies are being urged to “dramatically accelerate” their climate plans in order to keep global temperature rises within the 1.5C limit set by the Paris Agreement. Listed companies globally are still emitting greenhouse gases at the same annual level as they were in 2013, despite widespread climate pledges.

This has left some asset managers questioning their ability to meet the demand for sustainable investing. Most managers blame insufficient corporate disclosures, which lead to difficulties in defining and measuring ‘sustainable’ investments, according to a recent survey by Index Industry Association.

Madeleine Taylor
Editor, Institutional Asset Manager

Too big to fail? Twenty funds capture 87 per cent of investment flows in a month
Fri | 16 Jul 2021, 09:44
A handful of the highest-raising investment funds are scooping the vast majority of all money invested in a month, raising concerns that large passive managers are becoming “too big to fail”. On average, 87 per cent of monthly net investment flows go toward the top twenty funds alone, according to exclusive data from EPFR. 
CI Financial reports total assets of USD304bn for June 2021
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