Julia Leung: Passive funds continue to rise, with over-concentration of investments in large corporations

Ms. Julia Leung, Chief Executive Officer (CEO) of the Securities and Futures Commission (SFC),  stated today (Nov. 20) at the Global Financial Leaders' Investment Summit that the recent supply chain disruptions, trade disputes, and military tensions are not coincidental and that the only certainty is that the market is filled with uncertainty and volatility.

She noted that there are changes in the investment environment, including how innovative technologies are bringing the financial industry into a sea of infinite possibilities. The combination of algorithmic trading, machine learning, and artificial intelligence language models, is reshaping the functions of front, middle, and back offices, including sales, research, and client communication, etc. She described the need to think and train like a triathlete, improving agility and resilience to adapt to the changes of the times.

She further pointed out that passive funds continue to rise, attracting more capital inflows than active funds over the past nine years. This year, total assets in U.S. passive mutual funds and exchange-traded funds exceeded those of active funds for the first time. This trend highlights the vulnerabilities of over-concentration in large corporations. Popular trades can drive up company valuations and indices, but the market will experience volatility when enthusiasm wanes.

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