Rhind, who previously served as head of ETF Securities and was chief executive of commodities fund SPDR Gold Shares ETF, remarked in relation the current thinking of pension funds and other asset managers as they seek to attract funds: “It’s hard to paint all asset managers with one brush. In simple terms, asset managers seek to provide investors diversified exposure to markets with the goal of maximising return while minimising risk. This optimised portfolio can easily be provided through the use of passive funds, and in particular, passive ETFs.”
Add to this, the global economy is undergoing large-scale technological disruption across a broad range of industries. How this plays out going forward will have an influence on investing strategies. Indeed, take the so-called fourth industrial revolution (4IR), which is characterised by a fusion of technologies blurring the lines between the physical, digital and biological spheres. It is marked by several emerging technology breakthroughs in fields including artificial intelligence, blockchain and robotics.
“Passive investing, by design, allocates the majority of capital to the largest companies, many of which are likely at risk of being targets of disruptive forces. And, should disruption continue the environment may remain constructive for an active approach,” Hyde-Smith says.
But arguably and “most importantly”, according to Hyde-Smith, “will the withdrawal of the extraordinary loose monetary policies, which have characterised the post global financial crisis environment, result in a return to a focus on individual company fundamentals? If so, active management is likely to surprise positively.” But time will tell just how it pans out.
