According to Gerry Keenan, chief executive of Irish Life Investment Managers, up to half of all the money owned by big institutional investors such as pension funds will shift to passive management over the next five to six years.

This means the money will blindly track the performance of the main stock market indices, cutting out the need for fund managers and their claims to be able to add value by picking winning stocks while dumping the losers.

Keenan says these claims have usually not been met in practice, pointing out that Irish Life's flagship consensus fund has beaten the average actively-managed fund over the past decade.

"The vast majority of people under-perform and the general trend is that only 10% of active managers will beat the market over time, " he said.

"About 20% of assets in the institutional market is passively managed at the moment and, over the next five years, this will probably go to at least 40%, following the trend we've seen in the US and elsewhere."

Keenan said Irish Life's early embrace of passive management . . . index funds make up about 45% of its 28.1bn under management . . . has been a big driver in its recent growth. Last week the company reported new business of 1.1bn in the first half of the year, up from 750m in the same period of 2005. Keenan predicts that ILIM will pull in 1.75bn for the year as a whole.

"We're now selling in six months what we used to sell in a whole year, " he said.

And the business is gearing up for more growth in 2007, including taking over the management of 650m in savings for customers of EBS.

ILIM's strong performance contrasts with smaller rivals such as KBC Asset Management and AIB Investment Managers, which have stuck with the traditional business of active fund management.

"The market is getting more concentrated and there's no doubt that a number of managers have suffered because of that, " he said. "They didn't change their business models and, for them, it's going to get tighter and tighter."

Institutional clients are no longer prepared to accept that individual fund managers are capable of meeting all their needs under one roof, Keenan said.

"If we can't supply all parts of the solutions that clients want, we won't try to pigeon hole them into one of our products, " he said. "It's called open architecture, so that when clients come to us they're not automatically locked into our products."

To broaden the line-up, ILIM has hooked up with a overseas asset managers.

One of the main relationships is with London-based Henderson and ILIM has undertaken to channel 150m into its European property fund over the next 18 months.

According to Keenan, this makes more sense for ILIM than attempting to build its own European property fund from scratch.