Active fund managers hold fewer and fewer stocks

THE past decade has been tough for conventional “active” fund managers, who try to pick stocks that beat the market. They have been losing business to “passive” funds—those that try to replicate a benchmark, like the S&P500 index. Passive funds have much lower fees.Figures from Inalytics, a company that analyses fund managers’ portfolios, suggest that active managers are changing strategy in response. The average number of stocks in global equity portfolios has halved, from 121 to 61 (see chart). In a sense, active managers have become more active, making bigger bets on individual stocks. This makes their portfolios less like the index, meaning they can beat the market by a larger margin. But they can also do a lot worse. The portfolios examined by Inalytics have outperformed, but in the long term the average manager is unlikely to do so, since the index reflects average performance.Moreover, managers incur costs and the index does not. The result of more active management...Continue reading Equity investingActive fund managers hold fewer and fewer stocks They are hoping bigger bets let them beat the market, and passive funds print-edition icon Print edition | Finance and economics Mar 10th 2018 twitter icon facebook icon linkedin icon mail icon print icon THE past decade has been tough for conventional “active” fund managers, who try to pick stocks that beat the market. They have been losing business to “passive” funds—those that try to replicate a benchmark, like the S&P500 index. Passive funds have much lower fees. Get our daily newsletterUpgrade your inbox and get our Daily Dispatch and Editor's Picks. Latest stories Donald Trump imposes levies on metal imports Democracy in America15 minutes ago Women’s wealth is rising Graphic detail6 hours ago What is Donald Trump hiding? The answer may bore you Democracy in America7 hours ago Machines are getting better at literary analysis Prospero7 hours ago The Trump administration sues California over sanctuary protections Democracy in America8 hours ago For Dutch Jews, an overdue reassurance and an ancient dilemma Erasmus13 hours ago See more Figures from Inalytics, a company that analyses fund managers’ portfolios, suggest that active managers are changing strategy in response. The average number of stocks in global equity portfolios has halved, from 121 to 61 (see chart). In a sense, active managers have become more active, making bigger bets on individual stocks. This makes their portfolios less like the index, meaning they can beat the market by a larger margin. But they can also do a lot worse. The portfolios examined by Inalytics have outperformed, but in the long term the average manager is unlikely to do so, since the index reflects average performance. Moreover, managers incur costs and the index does not. The result of more active management will be a wider range of returns, dispersed around the same mean. For the typical client, that is a poor trade-off between risk and reward. This article appeared in the Finance and economics section of the print edition under the headline "Off the beaten track" print-edition icon Print edition | Finance and economics Mar 10th 2018 twitter icon facebook icon linkedin icon mail icon print icon Reuse this contentAbout The Economist

 

Bojíte se nám napsat ze svého e-mailového účtu? Založte si ihned nový zabezpečený e-mail.

ZALOŽIT NOVÝ E-MAIL PŘIHLÁSIT SE K E-MAILU