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Investment Association endorsement of active managers slated

Investment Association endorsement of active managers slated

A survey of Investment Association (IA) members that backed the ability of active equity managers to outperform in 2017 has attracted scorn of investment advisers.

A total of 63 percent of chief executives, chief investment officers, heads of product and sales from IA member firms picked equities as the asset class they believed would provide the best returns in 2017. 

Alastair Wainwright, fund market specialist at the Investment Association, said that IA members cited active equity managers' ability to take advantage of volatility as key to this endorsement.

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"Macro-economic and geopolitical factors are predicted to increase market volatility which can offer opportunities for active managers to outperform," he said. 

"This, combined with the expectation of low index returns, could mean that investors experience the benefits of active management in 2017."

The IA noted that equity funds had seen net outflows from equities in each month of the 2016, but that 73 per cent of members expected this trend to reverse this year.

Alan Dick, partner at Forty Two Wealth Management, was unimpressed with the findings.

He noted that on average active equity managers under performed compared with passive managers and that 2017 would be no different. 

"Even if there are geo-political shocks the active management's community's ability to benefit from them is poor at best and it is more likely it will harm investors than benefit them," he said, noting that there were no shortage of geo-political shocks in recent years.

Another adviser who is disregarding the IA survey is Jason Witcombe, director at Evolve Financial Planning. 

He said: "Their findings do not surprise me given the people who were asked the question. My advice to clients would be to have a balanced portfolio across a number of asset classes because trying to predict the future is a fool's errand."

The IA survey also found that 26 per cent of members quizzed predicted multi-asset to be the best-performing asset class of 2017 and 11 per cent thought it would be absolute return.

Notably, here 92 per cent of members predicted that net sales of multi-asset funds would be positive in 2017.

IA members saw an opportunity for the asset management industry to help savers reach their retirement goals, by adapting to the retail market some of the outcome focused strategies more commonly seen in the institutional market. 

In December data from Morningstar indicated just 21 per cent of the UK’s actively-managed funds outpaced the markets in 2016.

This was a steep decline from 2015 when 72 per cent outperformed the markets.

Many British companies have fallen victim to the UK’s decision to depart from the European Union, with domestically-focused companies being hardest hit by hesitant investors.

Data shows that even during 2008, when the financial crisis shook the markets, 36 per cent of UK funds outperformed.

In 2007, outperformance slumped as low as 32 per cent.

david.rowley@ft.com