Independent Thinking^®

Better Together: Revisiting Active & Passive

Editor’s note: Evercore Wealth Management Chief Investment Officer John Apruzzese met with clients in New York on June 22, 2017 to discuss the respective merits of active and passive strategies and to describe the firm’s blended approach.

Here are some of the key points. For further information on this and future investment seminars at the firm, please contact Jay Springer at [email protected] or your advisors.
 

• Relative performance of active vs. passive funds shows that no one style always beats the market.
• While the majority of actively managed funds have underperformed their benchmark, highly active share managers with the longest holding periods are more likely to beat their benchmark on a consistent basis.
• Fund fees for active and passive strategies continue to trend lower, driven by intense competition and economies of scale.
• Inflows into passive funds substantially increased after the financial crisis in 2008 and the fund flow gap between passive and active has widened in recent years.
• Increasing capital into passive strategies potentially causes a market inefficiency, which may provide more arbitrage opportunities for active managers.
• Given the ebb and flow of active vs. passive relative performance, we believe the right blend of active and passive strategies will generate tax-efficient investment returns.