Fund Management Strategy: What's trending in fund management? Exploration in charts
Active vs Passive, AI, Robo advisors and ESG. If we put all these keywords into the headline
it would make the most clickbait-worthy title ever. Over the past 2 years these topics have
attracted the most attention and interest from our clients. The broader public is interested
too – according to Google Trends search volumes on the above keywords are running at an
all-time high.
Passive share growth in the US has slowed considerably over the past 6 months. Using the
average growth rate over the past 2 years our new projection for the US 50% passive
milestone is not until Q1 of 2019.
However, we don't believe it marks a comeback of active management. There has been no
change in trend of persistent outflows from US active funds. We think the slowdown is a
result of the US market being generally out of investors' favour in 2017. There is a
background persistent trend flow from active to passive and additional transient flows
recognising that passive vehicles are investors' preferred route to taking tactical, regional
and asset class exposure.
Meanwhile, passive growth in Europe has accelerated over the same period and has been
particularly strong in the UK.
In terms of performance, active managers are enjoying a tactical revival this year. Our
sample of European fund managers have outperformed their benchmarks by around 3% so
far and the HFRI Equity hedge fund index is up by 8.2%.
As correlations remain subdued and intra-market valuation and ROE dispersion is still high,
our models suggest continued strong performance of both fundamental and quant fund
managers over the next 12 months.