One of our portfolio managers recently published a column in The Australian Financial Review on the contentious “active vs passive” investment debate, which you can download in full here. The column opened as follows:

“Buying a “passive” or “indexed” fund is lobotomised investing, predicated on the beliefs that the market is smarter than you are, investors are systematically rational, assets are always properly valued as prices move in an unpredictable “random walk” and, finally, one has no ability to identify those “active” managers that do consistently beat benchmarks. (Yes, they exist.) The problem is that every single one of these assumptions has at various times and across different sectors proven to be wildly incorrect, save for the question on your relative intellectual quotient and/or financial markets expertise. For those who never want to engage in analysis and/or are convinced they possess fundamentally inferior faculties, passive strategies may certainly be preferable to an “active” approach. And let’s be frank, many folks fall into this category. Yet let’s also bust the utterly misguided myth that passive investing is universally superior to active.”

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