Active Management: A Practitioner’s Perspective

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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.

Summary

• 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.

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