With a 14-year losing streak in index investing, it is perhaps understandable that so many investors and financial advisers have come to hate active management.
But, according to Michael Mauboussin, Head of Consilient Research at Morgan Stanley’s Counterpoint Global, active management of public equity markets is what makes indexing so achievable and attractive to investors.
“Active managers provide liquidity and make markets efficient, and indexers, in general, benefit mainly as stowaways,” he said Wednesday morning at the opening session of the virtual conference. by Morningstar.
In a presentation that delved into the finer details of how and why active management is a crucial ingredient of effective markets, Mauboussin also challenged the increasingly popular idea that private equity markets are the hotbed of new opportunities. investment.
Despite the fact that large endowments and foundations have geared their portfolios towards private markets, Mauboussin said size alone argues in favor of public markets over private markets for most investors.
âThis year through August, five stocks saw their market capitalization increase by more than $ 2 trillion,â he said. âWhen you talk about making money, there are still a lot more opportunities in the public markets. “
In addition to fewer opportunities in much smaller private markets, Mauboussin said individual investors are at a significant disadvantage when it comes to accessing the best investment opportunities in private markets.
âI would like to see individuals participate intelligently in private markets, but access is essential and it is difficult for individuals to do so effectively,â he said.
For reprint and license requests for this article, click here