Abstract:
In recent years, fund companies have vigorously developed passive investment, and their product structure has gradually shifted from active management dominance to a balanced emphasis on both active and passive strategies. Against this backdrop, examining the relationship between passive investment and active funds has become an important issue. From the perspective of fund family structure (the collection of publicly offered funds managed by the same fund management company), this study uses a sample of publicly offered open-end equity funds from January 2008 to December 2023 to systematically examine the impact of passive investment within fund families on active fund behavior and performance, as well as its underlying mechanisms. The findings reveal that: the higher the proportion of passive funds within a fund family, the lower the management fees and marketing expenses of active funds, and the better their performance; however, affected by product substitution effects, their net fund inflows decline. Mechanism analysis indicates that, on the one hand, Exchange-Traded Funds (ETFs) drive active funds to reduce fees through competitive effects, creating a market mechanism of survival of the fittest, thereby improving performance; on the other hand, management fees collected by Passive Index Mutual Funds (PIMFs) provide financial support to active funds through intra-family resource pooling mechanisms, helping active funds attract quality talent and upgrade research teams, thus promoting performance improvement. It is recommended that regulatory authorities, while encouraging the development of passive investment products such as index funds, guide the continuous and healthy development of active funds, and enhance investors' long-term returns through optimizing market structure.
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