Active Managers Not Beating Indexes

According to an article in Bloomberg, “fewer stock pickers are beating their indexes, with value managers among the worst performers.” The article cites a Morningstar report (that examined results of 4,500 active and passive U.S. mutual funds and ETFs) showing that just 36 percent of actively managed stock funds topped their indexes through June, down from 43 percent in 2017. It also reports that low-cost index funds have been “gaining market share for years as… Read More

Market Insights from Omega’s Cooperman and Einhorn

Leon Cooperman and Steven Einhorn of Omega Advisors have worked together for 40 years and have nearly 100 years of investment experience between them, according to an article in Barron’s that shares highlights of an interview with the two moguls. Cooperman and Einhorn “expect the bull market in U.S. equities to run for a while longer,” the article reports, “given relatively friendly valuations and Federal Reserve policy.” Bonds are another story, however. In the interview,… Read More

Active and Passive Investors: Which Perform Better?

Morningstar’s director of global ETF research, Ben Johnson, recently shared research regarding the relative performance of active and passive investors with Christine Benz. Morningstar’s data on domestic equity cash flow-weighted returns for index fund versus active investors, says Benz, “makes index fund investors look pretty smart. According to Johnson, the research shows that index fund performance has a lower “return gap”—the difference between time-weighted and cash flow-weighted returns. That is, index investors set expectations for… Read More

Joel Greenblatt Combines Active and Passive Investing

 In a recent episode of WealthTrack, Consuelo Mack interviewed Gotham Asset Management’s Joel Greenblatt, who shared his thoughts on active and passive investing and how he has combined the two in an effort to discourage investors from bailing out of a strategy in tough times. Greenblatt explained that human nature leads investors to pile into well-performing funds and pile out of underperformers—which ends in lost opportunity and dollar losses as well. He discussed the genesis… Read More

Why Both Sides of the Active vs. Passive Debate Are Right

By Jack Forehand (@practicalquant) —  It has become a common belief in the investing community that passive investing is superior to active management. And there is a large volume of data that supports that argument. Over time, active managers have not produced sufficient returns to justify their fees. In aggregate, finance theory tells us that active managers as a whole will produce the same gross return as the market over the long-term, and their underperformance on… Read More

There is Never a Good Time For Active Management – But Now Might Be One

By Jack Forehand (@practicalquant) —  When active managers are struggling relative to their benchmarks, you will often hear the same description of the problem. They will talk about how the current period has been a rough one for active management, but things are about to change and we are moving toward a “stock pickers market” where the criteria they use to select stocks will begin working again. They will argue that active management will rise again… Read More

Blending of the Best of Active and Passive

By John Reese (@guruinvestor) — (interested in Validea’s investing system and guru models? learn more about this webinar) Register now Like most things in life, investing in the stock market means different things to different people and encompasses a wide array of approaches—along with an endless supply of debate regarding which may be the best. There is no one-size-fits-all strategy, and every investor should follow a methodology that aligns with their financial goals and unique level… Read More

The Active Versus Passive Debate is Not Binary

By John Reese (@guruinvestor) —  There is an undercurrent running throughout the investment community suggesting that active stock-picking is the root of many investor ills, and one that has robbed them of returns. I would argue, however, that the debate is more gray than black and white. Passive investing, an approach in which investors buy a broad cross-section of the market and weight holdings based on market capitalization, is a rules-based, disciplined strategy that strives… Read More

What Passive Investing Might Mean for Stock Pickers

Investors are trying to figure out how passive investing strategies might help, or hurt, individual stock picking, according to a recent article in The Wall Street Journal. The article says that new research is showing “how the rise of passive investing—tracking a basket of securities rather than picking individual ones—is changing the makeup of markets.” Investors are reviewing factors such as the percentage of a stock owned by index funds and the flow of dollars… Read More

To Active Managers: If You Can’t Beat ‘Em, Join ‘Em

Arguing that the shift to passive investing is “really just a reflection of an even bigger move away from high-cost to low-cost funds,” a recent Bloomberg article suggests that active managers might want to consider offering their services as part of a complementary role to boost overall portfolio returns. Several arguments are offered, including: “It lets active managers be truly active.” If benchmark returns are coming from the passive portion of a portfolio, this allows… Read More