Speaking in Sydney last week, Nikko AM deputy president and global head of investment Yu-Ming Wang said the behaviours of active and passive investment managers are blurring the lines between the two.
“Active and passive can co-exist together, but the challenging part in our industry is that active management, in our view, is looking more and more like passive, and the passive strategy is inadvertently becoming very active,” Mr Wang said.
“Researchers have actually dug into the active industry and they have observed over the last three years most of the active managers have actually become ‘benchmark huggers’.”
Mr Wang said the content of active investment managers’ portfolios reflects the traits of a passive investment manager as the content closely “resembles the bench mark” of the S&P500.
Mr Wang also pointed out that recent investment strategies of passive managers reflected similar characteristics to those of active managers, referring to the investment trends of passive managers in emerging markets.
“Asia, for example, went from 50 per cent down to some 30 per cent at the bottom of the Asian financial crisis and now, because the benchmark is doing extremely well, it’s over 63 per cent,” Mr Wang said.
“If you had invested into emerging markets here with a passive strategy, you are basically filing a momentum strategy, you are buying it when it is doing well and you are selling it when the market is going down.
“Obviously there is nothing wrong with filing a momentum strategy, but you have to be aware that passive investing is a very active strategy in itself,” Mr Wang said.
