Only 10-20 per cent of investable assets need to be actively managed, says ETF Securities founder Graham Tuckwell – and the current scaremongering about ETFs is “absolute nonsense”.
Speaking in Sydney this week, ETF Securities founder Graham Tuckwell said there is a place for "very clever active fund managers", but the scales are currently tipped too far in their favour.
"You need those people out there in order to do the particular stock-picking, in order to price one security against the other, but you don’t need 80 per cent of the market doing that, particularly when they’re underperforming," Mr Tuckwell said.
"The majority of money should be invested in the passive stuff and the pricing of individual securities should be done by the active guys, which might comprise 10 or 20 per cent of the market," he said.
Those 10-20 per cent of active managers will be doing a "good job" and outperforming after fees, which is far from the case at the moment, Mr Tuckwell said.
Mr Tuckwell was quick to dismiss claims that ETFs are "weapons of mass destruction or that they're an Armageddon".
"It’s just absolute nonsense, because all that’s happening is that people are taking their money away from active fund managers who are charging a certain fee, and they’re putting it into a lower cost fee, but generally they’re still invested in the same markets," he said.
"It’s not as if the Australian market has got a huge amount more invested in equities compared with what it might have otherwise, it’s just been invested through a different channel," Mr Tuckwell said.
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