A common argument which regularly appears within the industry is the active vs passive debate. Passive investing has seen monumental growth over the last decade, but does this mean active managers are seeing a fall in demand for their services? The Lyxor Dauphine Research Academy has released its recent study to see the impact the development of passive investing has had on the active space.

Lyxor Asset Management and the University Paris-Dauphine House of Finance joined forces to form the Lyxor Dauphine Research Academy back in 2015, to research different areas within investing. A recent study by Cao, Hsu, Xiao and Zhan has shown positive feedback from investors now that there has been an increase in competition. In response to the growing number of passive products available such as smart beta funds, active managers have had to demonstrate that they can still deliver high returns in order to gather flows.

Marlene Hassine Konqui, Head of ETF Research at Lyxor Asset Management, said: "There's no doubt that passive asset management has enjoyed huge growth in the last decade. Yet, Passive funds still represent a small part of the asset management industry. But their usage is making investors more sensitive to complex measures of active management skill."

If anything, active managers could be exposed to more opportunities with the use of ETFs according to a research paper from Breugem and Buss. It is expected that more ETFs are to be incorporated by active managers and could result in attracting more fund flows.

These two papers sponsored by Lyxor Dauphine Research Academy share a mutual conclusion for the passive vs active argument: equilibrium. In the future, there won't be a dominant investment method. More investors will incorporate passive investing but this by no means suggests that active investing will become obsolete. The most likely result will be the asset management market will be comprised of an equal amount of passive investments as active investments.

Konqui also said: "while ETFs are helping generate a more competitive asset management marketplace, they will not replace the best-performing active managers. Therefore, both management styles will take a distinct share in the market as they both have a role to play in investors' portfolio construction".

Instead of the market arguing between active and passive, investors should be considering how to utilise both methods to develop the most optimal and diversified portfolio.