More than 10% of S&P 500 Assets Now Passive

$1.9 trillion is invested in passive strategies tracking the US’s leading stock index, according to research.

More than 10% of the market capitalisation of the S&P 500 index is now held by passive funds and index strategies, according to S&P Dow Jones Indices (S&P DJI).

The index provider said the amount of money directly indexed to the S&P 500 rose by “nearly 20%” during 2013 to $1.9 trillion. This included $282 billion in exchange-traded funds.

S&P 500’s collective market capitalisation is roughly $18.4 trillion, following an 8.7% rally this year, meaning passive strategies account for roughly 10% of the index’s total assets. However, the true amount of passive assets tracking the index is even higher as a further $67 billion is invested in products and strategies tracking S&P’s Composite 1500 and Total Market indices, which include exposure to the S&P 500.

Approximately $7 trillion of assets used the S&P 500 as a benchmark at the end of 2013, up 22% in 12 months, the company estimated.

Morningstar columnist and researcher John Rekenthaler earlier this month claimed passive investing was “now the mainstream approach” as investors have increasingly lost faith in active management.

S&P DJI said $2.6 trillion was directly indexed to its range of benchmarks—of which there are more than 1 million.

In addition, S&P DJI pointed out that roughly $52 billion was now directly indexed to its factor-based indices through smart beta products and strategies. These indices include S&P 500 Low Volatility, S&P Global Intrinsic Value, and S&P 500 Dividend Aristocrats.

Related Content: Morningstar: Active Management’s Secular Decline