Active or passive fund management: which one is on the fast track?
Will actively managed portfolios still have a place in the brave new investment world?
The rise of passive investment vehicles such as index funds and exchange-traded funds (ETFs) over the past few years has been one of the most noteworthy developments in the investment industry. Initially popular due to their low-cost structures, ETFs in particular have also benefited more recently from financial innovation and technology (the so-called “fintech boom”). Is this rise inexorable? And will actively managed portfolios still have a place in the brave new investment world? These are the questions many investors are asking themselves and their advisers. It’s easy to see the attractions of ETFs for many investors. By simply tracking an index, the costs for the investor can be pared down to a minimum. No fees for portfolio managers or analysts need to be charged. This is compelling for many investors, especially those who previously held funds that were marketed (and charged) as active investments but were really “closet passive investments” – that is, simply tracking an inde...
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