Investing in passive index funds has enjoyed a stellar run over the past 10 years, exposing the shortcomings of the pricier active approach in a market where everything is in full-on rally mode.
In fact, during that time, only 24% of actively managed funds outperformed their passive counterparts through 2018, according to Morningstar.
There’s a sense out there, however, that, as markets get twisted up in economic and political turmoil, we might see an active renaissance.
Jose Rasco, head of investment strategy at HSBC Americas, recently told Barron’s that it’s time for investors to embrace the active approach.
“There are parts of your portfolio where quite clearly you don’t need a lot of active management, and there are parts of the portfolio where you always need active management,” Rasco said. “But as you get later in the business cycle, we feel you’re more likely than not to need more active management.”
As a reminder to the uninitiated, passive funds largely follow a market index, with no management team behind any decisions, unlike active. In any case, Crescat Capital hopes Rasco has it right.
‘Can we get by this time with a less than 20% one and no recession at all? We strongly doubt it.’