But fund sponsors face a host of cultural clashes by introducing passive managers alongside active managers. For one thing, large cap passive managers typically outperform active managers thus giving rise to competition. Therefore, sponsors are able to better compensate active managers. Third, active managers are rewarded for both performance and asset gathering. Many become 'gunslingers'.
Passive managers stick to the stocks in their benchmarks.
Finally, several active managers, such as those featured in fund advertising campaigns, get caught up in public relations, thereby diverting some of their attention away from investment management. Defined contribution sponsors will likely favor an index option so they may offer similar products on both the defined benefit and the defined contribution sides. Fee-based planners building mutual fund wraps may include a large cap index fund as a core holding to be complemented by more aggressive active funds. Social Security reform, when and if it happens, will almost certainly stimulate more interest in index funds. Fund companies have responded to the market demand by adding product.