There’s no doubt active managers are under the cosh right
now. The Hymans Robertson findings show that active management, after paying
fees, has achieved little or nothing for the Local Government funds. Michael
Johnson of the Centre for Policy Studies sees no on-going active role in listed assets.
The problem is the solution. The solution seems to be passive management and passive management follows the herd. Down as well as up. The herd aren’t always right.
But it’s a hard job to convince the investor of that. In the age of defined contributions, it’s the member that needs convincing, not so much the company. And the individual investor is cautious. State Street research shows young investors, often new to pensions via auto-enrolment, are averse to risk. They don’t want to see decreases on their benefit statements -and they find it hard to rationalise that they should save at all if they can’t get the money until retirement.
Back to communications here. If the State Street conclusion was to be followed in practice, you end up with extreme caution, cash and bonds, lack of growth and potentially, a lack of pension. The long term investor needs to accept a degree of risk. Not to do so is to live in poverty in retirement. How we need that pension advice and education aimed at the member!
There is a role for the active investor in both defined benefit and defined contribution plans. They can add value, especially when everyone else is doing the same thing. Hymans results are disappointing but not conclusive to the demise of the active manager. Fees can be an issue. And communicating risk positively; even more so. But the demise of the active manger? Not while investment tactics can still produce superior returns when compared to a tracking computer.
The problem is the solution. The solution seems to be passive management and passive management follows the herd. Down as well as up. The herd aren’t always right.
But it’s a hard job to convince the investor of that. In the age of defined contributions, it’s the member that needs convincing, not so much the company. And the individual investor is cautious. State Street research shows young investors, often new to pensions via auto-enrolment, are averse to risk. They don’t want to see decreases on their benefit statements -and they find it hard to rationalise that they should save at all if they can’t get the money until retirement.
Back to communications here. If the State Street conclusion was to be followed in practice, you end up with extreme caution, cash and bonds, lack of growth and potentially, a lack of pension. The long term investor needs to accept a degree of risk. Not to do so is to live in poverty in retirement. How we need that pension advice and education aimed at the member!
There is a role for the active investor in both defined benefit and defined contribution plans. They can add value, especially when everyone else is doing the same thing. Hymans results are disappointing but not conclusive to the demise of the active manager. Fees can be an issue. And communicating risk positively; even more so. But the demise of the active manger? Not while investment tactics can still produce superior returns when compared to a tracking computer.
