Being José Mourinho is like being a fund manager

And then there are the fans. In our house, every decision José Mourinho makes is subjected to the beady analysis of an eight year-old ‘expert’ who thinks he possesses far superior team-picking skills.

But while, sadly, no-one would trust a small boy to run a football team, a child might cope pretty well as a fund manager. After all, most children are brilliant with computers, and is that not all it takes to run a fund? Do you really need a highly paid expert to select investment choices?

The answer is maybe you do in the current climate. Figures from Hargreaves Lansdown show that over five years the total return on a typical UK All Companies fund is 91 per cent, while a FTSE All Share tracker would be up 81 per cent over the same period. With around 80 per cent of the All Share comprised of FTSE 100 companies, the trackers have been forced to go for the larger companies, while active managers have had the freedom to pick from smaller ones too — and that is where the recent performance action has been. That expertise and freedom is what investors have been paying for.

Laith Khalaf of Hargreaves said: “We believe that active managers have benefited from a strong showing from mid-cap, compared with large cap stocks, as active managers are more likely to be exposed to these areas than the markets at large. This phenomenon was especially pronounced in 2014, which saw active UK managers strongly outperforming. Similarly, as larger caps hit back in Q2 of this year, the effect was a moderation of active funds’ outperformance of the index”.

With active it is about the added value a manager can offer, but for every happy José (fingers crossed), there is a David Moyes working on team selection

But look to the US market and the tracker wins: 113 per cent compared with 97 per cent from the average North American active fund. There would seem to be little point in paying a suit to pick shares in the US, when a geek in a hoodie could do just as well.

But it is not as simple as passive beating active or vice versa: it is down to the individual funds. With passive, you buy on price alone, and this has resulted in a Dutch auction. ETFs win on price, much of the time, but even within the ETF market, there is competition on cost: wealth managers SCM Private says there is a S&P 500 tracker with costs of 0.05 per cent; adding that competition means prices are falling further.

With active, it is about the added value a manager can offer. But for every happy José (fingers crossed), there is a David Moyes working on team selection. No one is always going to get it right, but if an active manager can not do better than the index most of the time, then maybe it is time to give them the red card.

Let us save Isas from the taxman

The simplification of Isas and the increase in the limit are, of course, both welcome. When Isas started out in 1999 they were complicated, and it has taken the intervening 15 years to perfect them.

But at the risk of sounding greedy, could there be a case for further improvements in Isas? Someone investing in Isas since the start could now have a comfortable six-figure sum tied up in them. And that is fine, as the money is protected from the taxman. But when they die, so does the Isa framework.

While there is no tax to pay on the income or gains in the Isa up until the date of the holder’s death, the Isa cannot be passed with its tax-free wrapper intact to their nearest and dearest. On death, Isa investments become taxable again. As proceeds become part of the estate for inheritance tax purposes, the holder’s prudence in saving in the tax-free Isa environment could just mean a big tax bill for their estate.

You could take this further. If someone gets divorced, would it not be better if an Isa could be passed between spouses without losing the tax advantages? Pension-splitting on divorce has been around a while, so why not Isas too? After all, Isas are increasingly used as part of pension planning, so equal treatment with them would be desirable. It is surely a debate worth having.

Selling a plan no one rates?

Ever since the Chancellor freed pension plan holders from having to buy annuities, no-one has a good word to say about them. But as Jason Hollands of TilneyBestinvest points out: “Most people need certainty in retirement, so an annuity still makes sense for them”.

How you rehabilitate them is another matter, and one the annuity industry, which is not well known for its marketing skills, may not be up to.

Charlotte Beugge is a freelance journalist