Are Purely Passive Strategies Just a Fad?

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By Brian Levitt via

It’s worth reflecting on once-popular investment strategies that have fallen out of favor.

I never believed in the prevailing view that active management is dead.

I know, I know: As Upton Sinclair said, “It is difficult to get [someone] to understand something when [that person’s] salary depends on not understanding it.” Fair enough.

But it’s not that I was willfully ignorant, waiting around for the final nail to be hammered into the coffin of active management. It’s just the opposite, actually. I work for a global asset manager that has diversified into a wide range of investment strategies, including rules-based strategies with different weighting methodologies than market capitalization.

Many of our firm’s assets are in global, international, and emerging-market equities—as well as in investment-grade, international, and emerging-market fixed income—where active managers have consistently outperformed their benchmarks over most intermediate- and long-term periods. We also have highly competitive products in categories in which active winners are less prevalent. So, I do have a dog in this fight—but perhaps not as big as it may seem at first glance.

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