This document studies the transformations undertaken by small active asset management companies in regard to the development of Exchange-Traded Funds and passive asset management. So far, very little academic research has been done on the links between these two trends. This study aims to start bridging this gap. Primary data are extracted from several semi-structured interviews of professional asset managers.
First, the researcher found that the development of passive management is not considered by small asset management companies as a threat for their activity. They however associate ETFs with a new systemic risk.
Second, the study investigates the strategic decisions taken by these small structures in regard to the development of passive management. Contrary to their biggest counterparts who penetrated this new market, small companies tend to ignore the passive management trend. Instead, they choose to focus their resources toward their competitive advantages: generating superior management performances and bringing non-quantifiable yet valuable services to investors.
So far, existing literature has widely ignored the existence of non-quantifiable service to investor and solely focused on performances.