Though the active versus passive debate remains alive among managers, from the client perspective, the burden is on money managers to demonstrate their value by finding "sweet spots" that increase returns and manage risks if they want to maintain record profits and compete with increasingly sophisticated passive investments, according to a new study from McKinsey.

The study found that traditional AUM rose 11% last year to a record $31 trillion in the U.S., Canada and Mexico. Revenue climbed about 10% to $111 billion and profits were up 12% to $37 billion, also records. Industry operating margins widened to 33%, the highest since 2007.

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