The Japanese equity market is seeing a similar trend, with nearly 80% of investment trusts and 70% of pension investments taking the index-buying approach.
Backers say index investing is more efficient, guaranteeing market-average returns at lower cost than the approach taken by active investors, who try to pick stocks that do better than average — and charge more for their alleged skill in doing so.
Japan’s Government Pension Investment Fund, the world’s largest, is leading the way in Japan, having doubled the proportion of its investments in Japanese equities from 40% in 2001 to 80% now. Other pension funds have followed suit. About 70% of their investments are now managed passively.