STREET DOGS: High fees, underperformance assured
To pretend that passive investing is some kind of panacea is naive
In a recent interview with the Financial Times, Quentin Marshall of Weatherbys Private Bank describes the asset-management sector’s story as akin to that of the Emperor’s New Clothes, in which fees are high and underperformance relative to an index almost assured. There is something to this, but to pretend that passive investing is some kind of panacea is naive. As Ian Lance of RWC Partners points out, "For anyone who believes in the long-term merits of value investing, passive investing should make little sense since it is the antithesis: passive investing structurally overweights expensive stocks whilst underweighting cheap stocks." Another wrinkle with the "pure passive" approach is timing. Blithely holding yourself as a hostage to fortune in the markets today just feels dangerous. As Lance says: "There are times when the market return is good enough, but now is not one of them." GMO, as an active asset manager, has proved itself no slouch when it comes to forecasting likely retu...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.