The chorus proclaiming the “death of active management” has grown louder in recent years and there has been a massive shift of capital out of active and into passive strategies. In this paper we share our perspective, as bottom-up stockpickers, on the active versus passive debate.
• Data appears to show that active managers, as a group, have performed poorly in recent years.
• However, this is misleading because active management is always a zero-sum game in aggregate.
• Instead, investors must decide whether or not individual managers can add value.
• We still see good reasons to believe in active management—but only if managers do the things necessary to maximise their odds of success on behalf of their clients.
• Ultimately we believe the current headwinds facing active managers are a cyclical confluence of events that is likely to pass.