In order to get their passive funds noticed, most of the major fund houses have participated in a price war in the past couple of years and many have reduced the cost of their passive vehicles by half.
It is now possible to buy a UK or a US tracker portfolio for as little as 0.07 basis points.
An active manager in the same space would cost as much as 0.8 basis points, and there is no guarantee that he or she would beat the market.
Indeed, over a one-year period to March 31 2016, just five active vehicles out of 78 UK onshore North American equity funds beat the S&P 500 index.
Global active managers did not fare any better in the same period, with just 48 active funds beating the MSCI World index (out of 241 products).
Stephen Watson is chief investment officer of Beaufort Investment Management
