Investors have more confidence in active management


Investors have more confidence in active portfolio management than passive management when it comes to achieving their goals, according to research by Quilter Investors.

The company found that 54% of investors would prefer to know that their portfolio is managed by a team of professionals, compared to 8% who said they felt comfortable letting a computer manage their money.

This was true even after accounting for costs, with passive investing tending to be less expensive than its active counterpart.

The research was conducted between May 27 and June 1 and interviewed 1,041 people with a minimum of £ 60,000 in assets to invest.

Danny Knight, chief investment officer at Quilter Investors, said that as the asset-versus-liability debate has raged for years, it was interesting to see that investors have much more confidence in active management.

“We are at a point in the markets where we believe active management should thrive. Concerns about inflation and interest rates are hampering bond yields, while we appear to be experiencing some rotation of market performance drivers.

“As a result, actively managed portfolios have a great opportunity to add real value to clients by providing flexibility and being able to capture style changes as they occur,” he said. -he declares.

But he added that liabilities still have their place in portfolios.

“There are a number of passive solutions that will give investors exposure to markets where the likelihood of an active manager to outperform is low, or where there are shorter-term tactical opportunities. “

Ben Yearsley, Investment Consultant at Fairview Investing, said: “I’ve been saying for some time that this could be a good time for assets as investors need more differentiation now.

“It’s also cyclical. We’ve had a long period of mega-cap domination (especially in the US) and prices have just become too high in many areas, leaving investors to look elsewhere.”

He added that there is also the ESG angle to consider. “I don’t think the passive has solved this problem well yet and that’s another positive story for the active.”

He explained: “Liabilities and trackers don’t handle ESG considerations well – you can’t really mimic an index while active funds incorporate ESG considerations into their processes.”

Active vs passive

The active versus passive debate has shifted more and more in favor of active management in recent months.

For much of the past decade, between the end of the financial crisis and the onset of the pandemic, bond and stock markets generally rose in value from the lows of the immediate crisis period, and liabilities recorded strong performance.

But James Burns, co-head of managed portfolio service at Smith and Williamson, told FTAdviser in May that with markets now expensive and having quickly recovered from the immediate lows of the pandemic period, and with considerable uncertainty As for the direction of savings and inflation “it will be difficult for passive funds to outperform the best active funds, which can be flexible and the opportunities that present themselves in the years to come. “

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