Stephen You, co-founder of the investment fund Blue Whale, said recently that active fund managers who fail to garner returns for U.K. individual investors should leave the industry, reports an article in Financial Times. Instead, those investors would be better served by putting their money into passive funds that track the market, while shareholders with more experience could try to beat the market through “high-conviction funds.”

Meanwhile, most of the strategically-conservative active managers could be wiped away, Yiu believes. Only 30% of active funds have outperformed their passive counterparts in the first 6 months of 2022. Managers are stretched too thin to do the research necessary to make bold moves; those managers, Yiu said, are “betting your career on the back of 25 stocks, and it can go wrong.”

Blue Whale itself bought up large stakes in tech companies over the last 2 years, and the tech rout has gouged Yiu’s portfolio, dragging it down 20% so far this year. Yiu has dumped his holdings in Google, Meta, and Amazon, with Microsoft now its top U.S. tech holding. He told FT that investors should seek out managers who have a solid track record of outperformance, but they need to keep close watch on how the funds are doing, rather than having blind faith in a “star manager.”

Blue Whale was launched in 2017 by billionaire investor Peter Hargreaves and Yiu, who seeded the firm with L25 million of his own money. According to Yiu, they had a large retail following from the start; the fund now manages L150 million, as of the end of July.