China Slant
But cost isn’t the only consideration. Some investors worry about the Asian bias since the MSCI Emerging Markets Index allocates more than half to China, South Korea and Taiwan.
“A lot of the Chinese listed companies are controlled by the government and state interest can take precedence over profitability,” said Mathieu Caquineau, a Paris-based senior research analyst at Morningstar. “There is a risk here by going passive that should not be overlooked.”
In the first five months of 2017, as emerging markets rebounded, active managers continued to beat their passive counterparts, albeit by a smaller margin: 17.2 percent versus 16.1 percent. Marshall-Lee’s fund added 27 percent.
“Ultimately it is about getting the stock-picking right and being thick-skinned enough to use the time when the market is worried about short-term issues to buy the right companies,” he said.
This article was provided by Bloomberg News.