Investors place more trust in active management

What's more, head of the Alliance Trust Investment Committee, Craig Baker, suggested the risk of legacy sustainability issues in publicly listed firms could even make actives less risky, as managers would pick up those risks.

In January, data collected by Quilter showedactive equity managers were outperforming indices in the majority of major equity sectors during 2020.

The data showed the managers outperformed market indices in seven of the 10 major Investment Association sectors, struggling predominantly in income-oriented portfolios.

Active managers performed best in the UK Smaller Companies sector, outperforming the index by 11 per cent, while the average UK All Companies fund was nearly 4 per cent ahead of the index.

The trend was also found in overseas funds. Those invested in global, continental Europe, Japan and emerging market equities were at least 1.6 per cent ahead of the index and returning up to 5 per cent more.

Other findings

Today's findings also showed that three quarters (74 per cent) of those surveyed said spreading savings across a range of asset classes was fairly or very important to them.

A further four in ten (41 per cent) said knowing their investments were well diversified would give them the most peace of mind.

This is compared to 8 per cent who said backing a few leading companies was important and 5 per cent who believed in the power of investing in one leading sector.

Knight said it was encouraging that investors remained convinced about the benefits of diversification.

“The phenomenal run by the tech giants will have caused many to feel they have missed out on big gains, but as returns in recent months have shown, things can change incredibly quickly.

“Diversification has proven to be of huge benefit to clients not just from a return and risk perspective but also the journey they go on to get there. For a lot of retail investors, it is often about the ride as much as it is the destination.”

Finally, many of those surveyed were unconvinced by the “myth” of the “star manager”, with 9 per cent saying the potential of a chosen fund manager becoming a star would give them the confidence required.