STEPHEN CRANSTON: Repent, active managers
Thanks to the rise of the Chartered Financial Analyst qualification there are now a million people in active investment management
The Americans have a great tradition of loud repentant sinners. Charles Ellis followed that tradition at a presentation by Satrix, that citadel of index management. Ellis is the author of 17 books, and started to question the value of active management in The Loser’s Game, first written in 1975. He said that in the 1960s he was addicted to active management, but better research in those days led to a real competitive advantage. It is hard for us to believe how clunky markets were at that time. Ellis joined one of the first investment counsellors, what we would now call independent fund managers, Donaldson, Lufkin & Jenrette (now somewhere in the bowels of Credit Suisse). It was a time when company research was as rare as gold dust. Having exclusive insights into a company was a competitive advantage for anything up to six months. In a few years’ time, Ellis believes, that time advantage will be just a couple of seconds. The investment counsel world was niched and the assets relative...
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