IUniverse Hammers More Nails into Active Management's Coffin
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Monday, August 26, 2013

IUniverse Hammers More Nails into Active Management's Coffin

For whom does the bell toll? Well, it just be ringing for active managers.

IndexUniverse's Cinthia Murphy wrote a lengthy piece on the vanishing role of active equity managers such as Peter Lynch, George Soros and Bill Miller. Many outlets have covered this issue over the years, but Murphy provides an exhaustive analysis of the issue.

Active managers have started to fade into the background, with few exceptions, such as Pimco's [profile] Bill Gross or DoubleLine's [profile] Jeffrey Gundlach, because investors have more information with which to make decisions and care more about low-cost.

Active managers have found better success in the bond market in 2012, with most active managers of U.S. government bond mutual funds performing well compared to the corresponding benchmark, Murphy writes. Murphy interviewed TCW's [profile] Chief Investment Officer, Tad Rivelle, who explained why active management was more conducive to bond fund, by saying to Murphy, "There are literally millions of contracts and bonds that exist out there, and the ability to have specific knowledge based on proprietary analysis of what these contracts may represent may not exist within the ETF space… "

One factor was the convergence of institutional pricing on transaction to retail pricing and new regulation in the early aughts that tracked the flow of information to equity investors, causing greater scrutiny to dry up stock tips, Rivelle told Murphy.

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