After a decade-long run of steady net outflows, the actively managed mutual fund space could use a good old-fashioned bear market. A down market, some argue, is where active managers will really stand out and prove they can still earn their keep.
Even though actively managed funds make up about 65% of all mutual fund assets, the steady performance of inexpensive market beta has left a lot of active management shops claiming they will be there when it's time to play some defense.
“The only market in which passive outperforms active is the market we're in right now with increasing asset prices and increasing p/e multiples, and the reason that's been the case is because of the extraordinary policies of the Federal Reserve,” said Bob Rice, chief investment strategist at Tangent Capital.
“When everything is flying higher, and the correlations are all at one, you don't need anybody to pick your assets,” he added. “The poor value-based active managers won't touch the stuff because it's too bubblish, and that's what has happened to the market over the last five years.”
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