4 responses to “UBS on active management: myth busters?”

  1. Glad to see you are still publishing.

    It is argued – not by active managers alone – that if everyone were to switch to passive investing there would be no investor driven pressures on managers to maximize outcomes at their individual enterprises and for that reason active managers as active and often activist shareholders are important to the overall health of markets.

  2. Hello Rolf,

    indeed nice to hear from you again via this blog and to see other old friends comment.

    Back in 1997 at McKinsey & Co, I had the good fortune to be a lowly associate involved in looking at exactly this issue when it was not yet at vogue with the result that roughly 99% of all active fund managers underperformed the markets over a 7-10 year period…leaving only 1% who are in your words if I remember them correctly either “lucky fools, or indeed geniuses.” For anyone to really be able to weed those out and think one can do so would surely be foolish…or at least be a more costly undertaking relative to using benchmark ETFs. In the past 20 years, investors and the tools at their disposal have grown increasingly sophisticated (think high frequency trading, access to information), that I would think that 1% has by now shrunk to basis points, not percentages.

    In the past 15 years, I really have only seen two funds that consistently outperform the overall US market – and both of those are very unique and highly complex strategies that have nothing to do with pure equity!

    It is always interesting though to see how particularly those banks that have failed most spectacularly at active management continue to keep pushing the same mantra – therefore, I very much enjoyed reading your comments.

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