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Why it's time to forget 'active versus passive'

By Tim Stewart · August 19 2017
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Invest

Why it's time to forget 'active versus passive'

By Tim Stewart
August 19 2017
Reading:
egg
egg
egg
Stock market

Why it's time to forget 'active versus passive'

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By Tim Stewart · August 19 2017
Reading:
egg
egg
egg
Stock market

The endless debate between indexing and active management is the investment community's version of the 'climate wars' being waged in politics, says QIC – and it is just as unproductive.

Australian institutional investment firm QIC has weighed into the perennial 'active versus passive debate' in investment circles, likening the argument to the 'climate wars' in federal politics.

QIC, a primarily active fund manager servicing super funds and other institutional investors, argued that active and passive strategies are complementary rather than "at logger-heads".

In a new paper titled Active management: skill, breadth and flexibility drives outperformance across investment cycles, QIC said investors should consider changing market conditions when selecting investment strategies.

The paper also pointed out that active investing is more about quality than quantity, and fixed income active management rewards good management by companies.

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QIC director for research and strategy Katrina King said, "We are passionate advocates for active investing, but that doesn’t mean that we turn up our noses at passive investing."

"It does mean, though, that based on findings from decades of investment research, there is compelling evidence to support the proposition that markets go through periods of inefficiency where they vary from fundamental value.

"By doing so, they create opportunities for active investors to outperform benchmarks by intelligently exploiting desired risks and avoiding undesired ones," Ms King said.

 

Why it's time to forget 'active versus passive'
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