The tide might be turning for active managers, as dispersion creeps back into global stock markets and investors realize their long-term return assumptions just won't cut it going forward.
Sources at money management firms and investment consultants said a new cycle is emerging, with clients' interest in active management piqued by challenges in the markets.
While there is not yet a tidal move toward active, “there is definitely an early sense that people have become a bit more open to having this conversation (about active management), and we just don't have doors shut in our faces when we start talking about active strategies,” said Luba Nikulina, global head of manager research at Willis Towers Watson PLC in London.
A number of institutional investors are considering the case for active, particularly in relation to long-term investment. Speaking at the Pensions & Investments WorldPensionSummit conference in The Hague, Netherlands, this month, Ronald Wuijster, chief client officer at APG Asset Management, based in Amsterdam said: “Passive is passé - you need to be active, and you need to be active in many ways.” (See related story on page 20.)
Long-term investing is about active ownership, identifying the underlying factors of investing, engagement and trends — “passive investing is far away from long-term investing,” Mr. Wuijster said. APG has €444 billion ($481.8 billion) under management, including the €376 billion in assets of ABP, Heerlen, Netherlands.
PGGM, which runs the assets of the €185 billion Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, has not materially changed its stance on the active vs. passive debate. “Most of our clients have passive investment beliefs, mostly from the perspective of cost effectiveness and being in control of the portfolio,” said Sander van Stijn, lead investment consultant at PGGM Fiduciary Advice in Zeist. Still, management is not purely passive — active decisions are made in benchmark construction, and investment managers have “a fair bit of room ... to intelligently deal with benchmark changes.”
However, PGGM is discussing with its clients how to focus more on the long term when it comes to managing portfolios. It is considering how best to facilitate that: “By thinking very differently with respect to the benchmarks we use, or is it better to give more along the lines of active management? It very much depends on the asset class or purpose of the investment mandate,” added Mr. van Stijn.