ETF funds in the US have some US$2 trillion in their coffers, compared with the US$11.6 trillion managed by traditional mutual funds. However ETF.com, which covers the industry, is predicting that ETF funds will be taking in some US$16 trillion by 2024. A survey by EY, previously better known as the accountancy firm Ernst & Young, predicted that the ETF industry was growing at an annual rate of 15 per cent to 30 per cent and would quickly surpass the hedge fund industry in terms of assets under management before moving on to challenge the bigger mutual fund business.

Robot funds have a long way to go before handling anything like this level of business. However, it is interesting to note that Charles Schwab, one of the biggest fund managers, has launched a product that closely resembles these automated funds.

It can be confidently predicted that the robot funds will grow because not only do they offer an objective service but they can be tailored to meet the precise needs of investors taking account of their individual priorities, risk profiles, age and other factors that customers wish to plug into the equation.

In this sense they are arguably better than ETFs that have no choice but to adopt a one-size-fits-all approach, as tracker funds do exactly what is says on the tin; they take a market and simply track either all of it or part of it.

Countless studies have now shown that this passive form of investment consistently beats active fund allocation because, and there is no polite way of putting this, most traditional fund managers are simply incapable of “beating the market”, despite persistent claims of their ability to do so. There are exceptions to this rule but even the most successful fund managers hit patches of under performance that can sometimes be rather prolonged.

One of the world’s biggest fund managers, Vanguard, has more or less conceded defeat in the active fund management game and gone hell for leather in launching ETFs. As a result it is one of the few fund management companies to have seen its business increase, while others have lost customers to ETF plays.

In Hong Kong the biggest pool of private investors are members of the Mandatory Provident Fund, forced by law to place a proportion of their earnings in this scheme, sums that are then matched by their employers. Returns on MPF funds have been dismal and it is arguable that the whole scheme is nothing short of being a scandal.

The MPF started out with an extremely limited choice of fund providers, most of whom charged high fees and produced lacklustre results. Under pressure the choice was modesty expanded and now the body that presides over the scheme is working on plans to reduce fees.

There is however no proposal to give Hong Kong’s hapless MPF investors access to ETFs, let alone to the new automated funds. Why not? I have asked an MPF Authority official precisely this question and received a response that left me none the wiser as it consisted of a muddled explanation of structures, difficulties of administration and lots of other bureaucratic stuff.

So, Hong Kong investors can expect to continue being short changed, while in the rest of the world the enormous revolution in the fund management industry is seemingly unstoppable. The US is leading this trend, with Europe trailing and places like Hong Kong distinctly lagging but this is indeed a revolution in the making. Maybe the robots will change the picture but the old ways of fund management are clearly under threat.

It is hard to regard this as anything other than positive news for smaller investors looking for a decent return on diversified investments and achieving this without paying hefty fees. MPF investors can only look on with envy.

Stephen Vines runs companies in the food sector and moonlights as a journalist and broadcaster