Jim Bianco, one of my favorite market analysts/researchers, points out that the “active money manager model is no longer viable.” He explains:
“The chart [below] shows flows into passive ETFs (red) and active mutual funds (blue). Highlighted on the chart is the depth of the financial crisis, September 2008. This appears to be the inflection point where investors soured on active management in favor of passive investing. So, if one thinks a bear market or more volatility will save active managers, the last bout certainly didn’t.”
I believe that the death of active management has been an exaggerated. I suspect that high active share managers, at more reasonable prices, with a good track record of occasionally outperforming, will stick around. However, I acknowledge that, I could easily be wrong.
More on this Monday . . .
Source: Bloomberg View
