Equities

The case for active asset management

Much has been written to assert the superiority of passive over active investing. Net of fees, it appears that on average passive management has produced higher returns.

10/03/2017

Gavin Ralston

Gavin Ralston

Head of Official Institutions and Thought Leadership

Much has been written to assert the superiority of passive over active investing. Net of fees, it appears that on average passive management has produced higher returns. The recent shift of money out of active and into index funds (see Figure 1 for equity funds) reflects the response by investors to this argument (amongst others) and is taken as proof that investors are giving up on active fund management. A resounding consensus has emerged that this trend will continue.

The growth in the numbers of professional investors – there are now 135,000 CFA charter holders, up from 80,000 in 2007, and 320,000 Bloomberg terminals – may mean the sheer numbers of skilled people attempting to beat the market have arbitraged away any potential gains from active management.

But seemingly unstoppable investment trends have a habit of reversing unexpectedly.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.