Rise of passive investing sends asset manager morale to 'a low'
The growth of passive investing has dented morale among active asset managers in the US, leading them to rethink their business models, according to Aberdeen Asset Management co-founder and CEO Martin Gilbert. Although good active managers will be more profitable for investors in the long run, in sectors that have become more and more commoditised, such as American large-cap equities, it makes more sense to go for passive strategies, Gilbert said.
Martin Gilbert is the cofounder and CEO of Aberdeen Asset Management, a $385 billion UK-based money manager.

The fund giant specializes in equities, fixed income, alternatives, and property. It has announced a merger with UK peer Standard Life, in a deal that would create a group with a combined £581 billion ($750 billion) in assets under management. Gilbert is due to be co-CEO of the combined group.

Business Insider sat down with Gilbert on Monday May 8, and talked about what's going on in the economy and the state of the active management industry. Following is a transcript of the video.

MARTIN GILBERT: I think the asset management industry, especially in the US, is going through a pretty tough time. If you speak to a CEO of a US asset manager, morale would be at a low, even though stock markets are at almost record levels. I think it's this march of the passive is eating into the flows of the active asset managers here in the US. It's especially prevalent in US large-cap compared to say, emerging market equities. So it is really leading to them to think about what they do with their business models here in the US.

I think for some investors just buying an index fund is the right way to go. But again, good active fund managers can outperform indices consistently. So if you do find the right active fund manager it's clearly better than a passive fund. But I would say in areas like US large-cap, which are becoming more and more commoditized in the US. Even the Warren Buffets of this world would buy a passive fund rather than active.