U.S. House panel reviews investment options and capital markets regulation

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House panel reviews investment options

Highlights

Retail stock market flows rose 53% from 2024 to last year as index funds and ETFs proliferated, enhancing individual portfolio customization.
Active ETFs are now growing faster than passive ETFs following the SEC's 2019 ETF Rule, with demand increasing for ETF structures beyond passive strategies.
The asset-weighted average expense ratio for active funds fell to 0.57% at end-2023, about 30 basis points lower than a decade ago, driven by lower fees and investor migration to cheaper funds.

Hearing examines investment trends

As reported by the House Committee on Financial Services, the House Financial Services Subcommittee on Capital Markets holds a hearing led by Subcommittee Chairman Ann Wagner to examine the modern investment ecosystem and the strategies available to Americans. Lawmakers center the discussion on the rapid expansion of retail investment options, including the growth of passive investing, index funds and ETFs.

Full Committee Chairman French Hill says retail flows in the stock market rise 53% from 2024 to last year, while passive and index investing continue to expand and the number of ETFs surges. He says the increase gives individual investors more ways to tailor portfolios to their timelines and risk tolerance, and that the hearing explores how active and passive strategies both contribute to market functioning.

Wagner says the committee is not seeking to pick winners and losers among investment products, but to understand what these trends mean for retail investors and retirement savers. During the hearing, Frank Lucas asks Investment Company Institute Chief of Government Affairs and Public Policy Tom Quaadman about the INVEST Act, and Quaadman says the measure would support public capital markets while also broadening investor opportunities.

Capital market impact and policy focus

Lawmakers frame the discussion around the role of competitive and transparent markets in supporting retirement savers and business funding. Warren Davidson says healthy capital markets depend on competition, transparency and accurate price signals, while Andrew Garbarino says the United States remains the world's leading destination for investment because of deep capital markets, investor protections, transparent disclosures and a long history of innovation.

Bryan Steil raises questions about market development following the SEC's 2019 ETF Rule, and Capital Group Vice Chair Jody Jonsson says the change helps level the playing field between active and passive ETFs. She says active ETFs are now taking share from passive products and growing faster, suggesting investor demand is tied not only to passive strategies but also to the ETF structure itself.

On fund costs, Morningstar Managing Director Jeffrey Ptak says the asset-weighted average expense ratio for active funds stands at 0.57% at the end of last year, about 30 basis points lower than a decade earlier. He says lower fees from fund managers and investor migration toward cheaper active funds both contribute to the decline, while witnesses broadly argue that lower costs, wider access and balanced regulation continue to strengthen capital formation and investor outcomes in the U.S.

Our earlier analysis of Canadian Natural Resources (CNQ) highlighted how the stock’s steady dividend hikes and resilient cash flow support its appeal as a long-term holding, including for passive funds tied to major indexes. At the same time, we noted that CNQ remained under short- and medium-term moving averages, with bearish momentum and a defined near-term trading range that kept short-term risks elevated.

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