STEPHEN CRANSTON: The active-passive line
It is not just active managers who are threatened by the growth of index funds
It is not just active managers who are threatened by the growth of index funds. There is a whole secondary industry made up of people who "pick and blend" active managers. What role will they play if there is ever consensus that picking managers represents a costly zero-sum game? Yet paradoxically, the designated investment management (DIM) industry has grown almost as fast as index funds over the past five years, first in the UK and now here in SA. The DIMs are a retail version of multimanagers. They advise financial advisers on what managers to pick and in what proportions. Presumably they will become redundant when funds have to choose between, say, the Satrix and the Stanlib Alsi 40 fund. For now DIMs such as Analytics, PortfolioMetrix and Morningstar are helping their clients in the transition from picking out of the lottery of fully active funds to a blend of active and index funds. David McCarthy, when he was the main pensions adviser at the National Treasury, was keen to mak...
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