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Active Managers Need To Shed As Much As $10 Trillion, Kraus Says

Active Managers Need To Shed As Much As $10 Trillion, Kraus Says

Peter Kraus is the CEO of AllianceBernstein Holding, a global asset management firm with nearly $500 billion in assets under management as of the end of April. So when he says that global asset management firms, such as his own, need to scale back on their assets by as much as 30 percent, investors are naturally curious to understand why.

Speaking as a guest on Bloomberg Television on Tuesday, Kraus suggested that the $30 trillion asset management industry has grown at an unsustainable rate which forces managers to maintain too many positions.

He suggested that in order to beat industry benchmarks, fund managers would need to shrink their assets.

Last month, BlackRock's CEO Laurence Fink echoed similar comments and also told Bloomberg Television that fund managers continue to struggle to at least match the returns of the benchmarks. To reverse this trend he said that industry consolidation within the asset management space may be necessary because there just simply too many managers can't generate sufficient returns.

According to data compiled by Bloomberg, only 35 percent of actively managed equity mutual funds matched the returns given by the benchmarks, compared with 47 percent in 2015 and 26 percent in 2015. As such, investors have pulled out around $179 billion from actively managed equity funds and poured the cash into exchange-traded funds over the past 12 months through April.


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