November 18, 2020 Julie Hyslop

The ‘Last Dance’ for active fund management?

In a recent Australian Financial Review article, Aleks Vickovich, Wealth editor makes a compelling case outlining evidence on why we might be seeing the ‘last dance’ for active fund management and speculation as the figures show consistently a passive investment global indexed model continues to outperform.

In this article he uses the analogy of the Netflix series “The Last Dance” that many sports fans will be familiar with and where one of the greatest athletes of our time Chicago Bulls star Michael Jordan is portrayed leading a languishing and underperforming Chicago Bulls to a ‘golden decade’ of success that today NBA clubs still dream of achieving. While the series does a lot to highlight oversized suits with padded shoulders it also contains a very current lesson about managed funds.

Like the scoreboard at the end of a tightly contested Michael Jordan lead championship NBA game, the following chart demonstrates that the figures do not lie:

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The above figures make us ask the question; are we seeing the ‘last dance’ of active fund managers that claim to have the skill to select stocks that generate above average returns for clients? or value fund managers that select stocks based on the assumption that they are overpriced? Again, the figures show a continued underperformance when compared against an indexed model.

In this Financial Review article, Vickovich also states that the Global Financial crisis and COVID19 have further compounded the reasons why active fund managers might really need the superior skills akin to Michael Jordyn to compete with the Global indexed figures providing returns for passive investors.

This Financial Review article can be accessed via the Income Solutions facebook page at
https://www.facebook.com/incomesolutions

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