Investment managers at a recent press conference sponsored by Natixis predicted that 2019 will be a good year for active management.
“It will make the case for active management,” said Andrea DiCenso, a co-portfolio manager for Loomis Sayles, who spoke at the conference.
She is part of a group of investment managers who are trying to make the case for active management. They warn that passive investing will result in an investor slaughter during a protracted bear market.
They say the investing norms of the past decade were based on cheap money created by central banks and relatively low volatility, both of which no longer apply. Central banks are now raising rates, and the markets have been whacked by volatility in the fourth quarter and many people expect that more could be in store in the near future.
Not So Fast . . .
Despite the stars now seemingly aligned for active managers, an industry observer says everything isn’t perfect for active management.
Ben Johnson, director of global ETF research at Morningstar, says the talk of active management making a comeback smacks of market timing, which he warns is moonshine. Johnson has studied the longer-term track record of active versus passive performance, and has found there are a few instances where active funds outperform indexes. In most cases, he says, actively managed funds with low costs are the ones that tend to perform well.
Although active managers say the future is now for their investment management approach, Johnson noted in Morningstar’s Active/Passive Barometer report that their recent numbers are poor.
“The one-year success rate among active U.S. stock-pickers declined relative to year-end 2017. Just 36% of active managers categorized in one of the nine segments of the U.S. Morningstar Style Box both survived and outperformed their average passive peer over the 12 months through June 2018,” according to the report.
Nonetheless, Johnson agrees that greater dispersion gives some active managers a better chance to beat the indexes.