Home >
Cazenove dismisses 'drum-banging' passive management
Cazenove's Robin Minter-Kemp has dismissed passive fund managers such as Virgin and Vanguard saying they "bang the drum" during recessions but fade away as markets recover.
However, other managers believe that more advisers will be driven to recommend passive funds as IFAs focus increasingly on costs as part of the Retail Distribution Review (RDR).
Speaking at an asset.tv distribution masterclass, Mr Minter-Kemp, managing director of investment funds at Cazenove Capital, said: “I don't believe passive fund management is here to stay. It is, to an extent, circumstantial to where we are in the cycle.
"There is wider access to exchange traded funds post-RDR, but there's always going to be demand for passive at this time in the cycle. But as soon as you get momentum back into the marketplace you will see demand dissipate."
Mr Minter-Kemp said that the reverse applied to active funds, which often struggle to beat the market at this point in the cycle.
He said a "very prolonged tipping point" meant that price disparity was extremely stretched.
"Of course, we get the passive fund management industry banging their drum at this point in time, the Vanguards, the Virgins. We all remember, those of us who go back to last recession, that if you go down this route, when the market actually gets back to normal momentum, whether that's down or up, active fund management is the right place to be," he added.
However Andy Clark, managing director of wholesale at HSBC Global Asset Management pointed out that, in some cases, the difference between active funds and index trackers had grown from 25 to 50 basis points to as much as 100 or 125bps. With advisers having to be more focused on the overall cost of portfolios this could see more turn to passive funds.
Mr Clark said: "With active and passive, the catalyst isn't performance. If, in an RDR world, as an adviser you charge an overall advice fee, one of the things you may be more cautious about or more focused on is bringing the overall cost of the portfolio down."
John Clougherty, chief excutive at Aviva Investors UK Funds, said: "We have passive capabilities and supply those to clients but it's not core to our proposition. Active managed, managed investment solutions and increasingly alternative solutions are focuses for us. This is playing to the distribution structure we have. It is very broad and, fortunately, we've got the scale to be able to play in all those areas."
