Does anybody have phone numbers for Paul McCartney and Stevie Wonder? The way I see it, they are pretty much the last hope of saving the asset management industry from those unhelpful souls who insist on framing active and passive investing as an either/or ‘debate’.
Actually, it does not even have to be a new song – a quick repurposing of their previous collaboration ought to do the trick. Some gentle crooning along the lines of “we all know that funds are the same wherever we go – there is good and bad in every one” – before building up to a resounding chorus on how “active funds and passive ones” should “work together in perfect harmony”.
I realise the idea might sound a bit upbeat – touchy-feely even – for this column but all the alternative subject matter is way too depressing at the moment. Worries – legitimate or otherwise – about China, commodities, interest rate policy and so on? No thank you. And as for Brexit – as I write, the date for the referendum was only confirmed yesterday and already I have had enough.
And anyway, no effort should be spared – including the co-opting of music legends – to encourage the idea that active and passive funds should be working together in perfect harmony. This is partly because it makes sound investment and financial sense for end-consumers and partly because it makes sound business sense for Her Majesty’s financial services industry.
Whenever an advocate of active or passive does the other style down – too inflexible, too expensive, you know the drill – no doubt they fondly imagine investors flocking to their cause but I have long suspected the reality is rather different. The various arguments do little to clarify – instead serving more to confuse. And confused people end up putting off investing to another day.
It was refreshing then to hear Jonathan Willcocks, M&G’s global head of retail sales, acknowledging a world where core equity exposure is increasingly accessed by passives, while more money is invested in active strategies where it is arguably easier to generate alpha – under-researched markets, esoteric asset classes, flexible mandates, asset allocation funds and so forth.
“Those are the areas where active managers can do well because they have a much broader canvas on which to paint,” he suggested, in a filmed interview you can watch at M&G’s www.iviewtv.com or indeed my former stomping ground at www.adviser-hub.co.uk/HubTV. “The more flexible a mandate you give a fund manager, the greater their chance to generate outperformance.”
And with that sniff of a happier, more inclusive world, I leave you and also the space I have occupied in Portfolio Institutional since its first issue. In among the silliness, I flatter myself that there have been a few gems – much like markets then. Hey, look at that, one last tiny moral. Happy investing and, all together now: “Active funds and passive ones – side by side in my port-foh-lee-oh-ohhh …”
Julian Marr is editorial director of Adviser-Hub and co-author of ‘Investing in emerging markets – the BRIC economies and beyond’
