Opinion  

Buy low-cost passive funds, not actives

Rob Wood

In response to Jeff Prestridge’s column on passive investment (FA, 21 April), what about survivorship bias?

The UK market is a global leader in closed/merged under-performing funds, which massively inflates the averages you see today.

The UK Equity market only makes up 7 per cent of global equity markets. How well are active funds doing in US, Europe and Japan, and in emerging markets and fixed interest? Should our clients not hold a globally diversified portfolio?

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Is the average fund in the UK not taking more risk than the FTSE All Share index? Risk and reward.

Is is more relevant to buy low-cost funds to expose clients to certain factors of the market (size and value, etc), rather than high-cost actives.

Passive fees have reduced in cost more substantially than active funds. Will this impact on the comparison in the future?

Rob Wood

IFA

Wychwood Financial Services, Bristol