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Watch real estate for first signs that passive investing has grown...

The future of passive investing is facing one of its biggest tests yet. And surprisingly the challenge is coming from a handful of relatively obscure real-estate companies. Funds that track indexes are coming increasingly close to owning a majority of shares in eight property owners and managers, according to a report from Bloomberg Intelligence. That makes these companies potential bellwethers for the impact of benchmark tracking as the funds grow. “For firms with high passive ownership, you have lower reaction to company-specific news,” said Itzhak Ben-David, a finance professor at Ohio State University who’s studied the topic. Variously described by active managers as being akin to Marxism or financial weapons of mass destruction, indexed funds are poised for another year of inflows as actively managed products hemorrhage cash, data compiled by Bloomberg show. Tanger Factory Outlet Centers Inc., which owns and operates out-of-town retail parks, could be the first stock to test passive’s tipping point. Indexed funds own 46.9 percent of the real estate investment trust, which has a market capitalization of $2 billion, the data show. It’s owned by dividend strategies, funds that buy mid-cap or small-cap companies, and investors in real estate or REITs. Bloomberg Intelligence also found little correlation between Tanger’s stock price and flows into the largest fund that owns it.