Active vs. Passive – The Endgame

Published on
October 27th, 2020
Duration
44 minutes


Active vs. Passive – The Endgame

The Interview ·
Featuring Lee Robertson

Published on: October 27th, 2020 • Duration: 44 minutes

Managing editor, Roger Hirst, sits down with Lee Robertson, CEO and founder of Octomembers.com, to explore how the future of active management will impact the opportunities and risks available to investors. Robertson attributes the current outflows from active into passive not only to insufficient performance to justify active manager's higher fees, but also to a younger cohort of investors entering the market, who are more interested in thematic investing and daily liquidity than they are in having a hedge fund manager make big bets on their behalf. Hirst and Robertson discuss the move for traditional asset managers to become passive asset-gathering and for hedge fund to re-invent themselves as long-only shops. Lastly, they look forward to how technology will impact the future of investing, such as blockchain driving down the frictional costs of transactions. Key learnings: Fee compression for active managers will likely continue. The days of the "all-star trader" are gone, and it is the risk manager who holds the keys to power. Yet the narrative of "the death of active management" is overblown as there are fantastic managers out there who are delivering consistent alpha.

Comments

Transcript

  • RC
    Renzo C.
    2 November 2020 @ 12:15
    Macro theme shall prevail so passive will be used for active management for quite a few years
  • DH
    Dagobert H.
    31 October 2020 @ 19:52
    He is overseeing that the ETF industry is innovating too. It’s not just active versus passive, the borders are blurring. Small boutiques are offering ‘active managed’ ETFs especially in the thematic space: ARK Invest (genomic revolution, disruptive innovation), Kraneshares (China-focus: ecommerce, digital health) or Motif (acquired by Goldmann), just to name a few. By the way, would love to hear more talks at RV how to generate alpha by thematic investing.
  • CP
    Chamil P.
    30 October 2020 @ 02:36
    Good site to see Active vs Passive performance. spindices.com/spiva/#/reports
  • DS
    David S.
    28 October 2020 @ 17:07
    Excellent interview. Two brief comments. The exclusive passive cycle will be over when markets decline, and CBs cannot reverse the decline with liquidity. The CBs are currently taking the risk of passive investment. When the market drops 30% and stays down, passive will not look so good. Secondly, active manager firms need to and may already have passive management departments within the firm. It certainly is easy enough to do. The obvious synthesis to an outsider. They can run clients’ money both ways. I really like the portfolio construction that Mr. Hirst suggested looking at the percentage of gold, cash, passive and active assets in the portfolio. Mr. Robertson is smart with a wealth of knowledge and experience in these areas. A great guest for a deep dive into these issues. Thanks. DLS
  • SR
    Shawn R.
    27 October 2020 @ 20:07
    Could we please get a transcript
    • MR
      Milton R. | Founder
      28 October 2020 @ 08:13
      it's on
  • df
    diamantino f.
    28 October 2020 @ 03:53
    Please RV a transcript would be perfect and active :) thanks
    • MR
      Milton R. | Founder
      28 October 2020 @ 08:13
      Yup, uploaded
  • PK
    Philipp K.
    28 October 2020 @ 07:50
    Need more learning less opinions and discussions. thanks for the perspective though some charts or data would have been nice
  • sc
    sung c.
    28 October 2020 @ 01:55
    Firstly: It's been so long since I've seen a normal interview with two people at normal distances without masks, I had forgotten what it used to look like. Secondly: I wish safety to both. Ah the good old days of normal conversation. Funny the simple little things we miss when we have been without them.
  • sc
    sung c.
    28 October 2020 @ 01:55
    Firstly: It's been so long since I've seen a normal interview with two people at normal distances without masks, I had forgotten what it used to look like. Secondly: I wish safety to both. Ah the good old days of normal conversation. Funny the simple little things we miss when we have been without them.
  • AI
    Andras I.
    28 October 2020 @ 01:16
    The finest of Britain on the shelves: David Hockney, Martin Parr and Don McCullin. Nice one!
  • PG
    P G.
    28 October 2020 @ 01:03
    Love the quality of this video!
  • JL
    J L.
    27 October 2020 @ 15:43
    The industry's dirty secret is that talent is scarce and the sums that need managing are huge. For every $100 million of talented manager capacity there is probably $100 billion worth of funds that need managing. That is just a guess but the ratio seems somwhere in that ballpark. The glut of capital relative to talent creates a marketing opportunity for mediocre managers and crappy Wall Street products. This means the allocators, who want talented managers, are basically looking for needles in a haystack, while trying to dodge sales pitches from managers who claim to be talented but aren't. I would wager this explains far more of the problem than investors being too short-term today. It takes real talent to do well; the talent is just in astonishingly short supply relative to a glut of capital, with the glut in part facilitated by ten years of QE and ZIRP.
    • LS
      L S.
      27 October 2020 @ 19:43
      From what I know about life, the business world, and marketing (I'm a physician) this sounds exactly right. For what it's worth, I'm 25% cash, 25% commodities, and 50% bitcoin.
  • JP
    John P.
    27 October 2020 @ 17:03
    Roger - great comments and questions from you. Well done.
  • RM
    Robert M.
    27 October 2020 @ 17:01
    Agree with his strategy of the barbell approach of using passive funds for some of your portfolio and looking for alpha with individual stocks. Hirst threw out 60% in passive, 10% in gold/bitcoin, and 20% in active management. Guess the other 10% would be cash. Not a bad weighing.
  • TE
    Tom E.
    27 October 2020 @ 10:07
    Don’t subscribe to the “vs” narrative. Why does it have to be one or the other. Why can’t a smart investor portfolio include both passive and active managers?
  • SK
    Sergejs K.
    27 October 2020 @ 09:42
    The passive managers became too-big-to-fail, and there is no way they are giving up their market share to active in the near future. Even in downturns, they show better performance and lower volatility, which makes them an optimal choice for big investors. Probably only some huge systematic risk could break this leadership.
  • PB
    Pieter B.
    27 October 2020 @ 07:31
    Great conversation! Thanks a lot!