Investment migration to passive investment strategies is a trend that will not be changing soon, according to research recently published by analysis firm Greenwich Associates and commissioned by FactSet.

Strategies involving low-fee index-tracking products are expected to make up as much as 24% of all global investment by 2020, according to Richard Johnson, vice president, market structure, and technology at Greenwich and author of the study.

“The active managers with whom we spoke were very sanguine,” said Johnson. “They realize that their performance as an industry is not good enough and that they need to focus on performance.”

Over the past five years, more than 88% of actively managed US large-cap funds under performed the S&P Index while 74% of actively managed large-cap funds in Europe and Japan also underperformed similar benchmarks.

Many of the survey respondents confided that an extended bear market could start the investment pendulum swinging back towards active management strategies, according to Johnson.

“But nobody wants a bear market, and there is no real empirical evidence that active managers do better in bear markets,” he added.

If active managers want to attract more assets, they will have to up their game.

Approximately half of the respondents stated that they saw the need to offer innovative products to help differentiate themselves from their competition.

“A lot of active managers seem to agree that active ETFs and factor-based ETFs, or smart beta ETFs, could be a good way for them to diversify their product suite and increase their assets under management,” he said.

However, only about 20% of the respondents manage or plan to manage active ETFs while a similar number manages or plans to manage factor-based ETFs.

One shared opinion among the majority of the respondents is that cutting costs will not allow firms to lower their fees. Only 9% of the participants said that reducing their operational costs would allow them to reduce fees while another 13% of the respondents thought that they could cut costs by consolidating their product suites.

“We asked about merging with other asset managers to gain economies of scale,” said Johnson. “None of them that saw that as a good strategy.”