Passive versus active: It needs no debateBY JOHN DYALL | THURSDAY, 10 AUG 2017 9:12AM Have we entered the post-truth world in discussing passive versus active investing? There has been a lot of talk recently about the rise of passive versus active in equities investing. Upgrade your subscription to access this article
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Passive investment is perfect for advisers that don't know what they are doing. Our in-house blend of active managers has consistently performed better than the equivalent passive counterparts & for less risk on the same asset allocation.
Employed passive Business Develop Managers struggle to understand this because all of their research compares to the "average" active manager. Well there's enough rubbish investment funds out there that pull the average down. A fairly simple comparison is merely looking at the average returns for well rated funds. The moral of the story is don't be slack in your fund selection. Ensure you are with a well rated fund & for the public ensure you are with an adviser that can explain the differences in funds to you.
John, well balanced of both side's arguments and representations. My main beef with comparisons of the two is that it assumes one can (and does) invest in an entire universe of active managers. This seems absurd to me as we cannot do so. Its result is meaningless for investors making an informed appraisal.
It also infers advisers and researchers have no means of value-adding in sorting out the entire universe...which seems an unlikely assumption (though not proven) as well.
Second it should remove active managers that are 'index huggers' at an active price. Say an R2 score over 80 longer term?
Third, yes weightings should be applied if doing like for like, but even then the flaw of point one renders it all useless anyway.
Its interesting to view the performance of active managers that gain the bulk of inflows only against the index over 3 and 5 year rolling periods - of say international Australian domiciled funds since 2000.