House subcommittee examines how active and passive investing shape capital formation and retirement outcomes

Chair Wagner opened the Subcommittee on Capital Markets hearing saying it would "examine the changing dynamics between active and passive investing, and whether our regulations are keeping pace with market innovation." The chair framed the session as focused on implications for retail investors and retirement savers.

The hearing brought together buy‑side executives, an academic and industry researchers. Jody Johnson, vice chair of Capital Group, testified that "active management is the linchpin of the whole system," arguing active managers perform price discovery, help set IPO prices and provide options for investors with varied time horizons and risk tolerances. Professor Matthew Ringenberg of the University of Utah said his research shows passive investing has transferred money into investors' accounts by lowering fees, but that "the rise of passive index investing has reduced aggregate information production," which has implications for corporate governance and shareholder voting.

Jeffrey Patak of Morningstar emphasized the practical effect of fees, telling the panel "cost drives outcomes" and summarizing data showing large flows into low‑cost funds and ETFs in recent years. Panelists agreed that innovation such as active ETFs and the SEC's 2019 ETF rule expanded investor options but warned that policy choices influence whether markets remain competitive and transparent.

Members pressed witnesses on policy responses. Several lawmakers urged passage of bills the committee has backed—referred to during the hearing as the INVEST Act and the Growth Act—to lower barriers to public listings and to align tax treatment between mutual funds and ETFs. Witnesses recommended preserving both active and passive choices on public platforms, improving fee and disclosure comparability, and safeguarding shareholder voting mechanisms.

The hearing closed with the committee asking for additional materials and written questions; the chair set a July 30, 2026 deadline for witness responses. The record shows bipartisan interest in maintaining low costs for savers while ensuring active market participants can continue to supply price discovery and governance oversight.