Investment experts weigh active management against passive ETFs

Investment experts are discussing the evolving balance between active fund management and passive Exchange Traded Funds (ETFs). While ETFs have seen rapid growth due to their low costs and simplicity, particularly in efficient markets like the S&P 500 or MSCI World, professionals suggest that active management remains vital in specific sectors.

Götz Albert of Lupus alpha notes that while his fund focusing on smaller German companies has faced a difficult five-year period, its long-term 25-year performance has significantly outperformed benchmarks. He highlights the challenge of attracting new investors during periods of stagnation despite long-term success.

Swen Köster of Moventum AM suggests that the optimal approach is a combination of both strategies. He argues that while ETFs are ideal for liquid, efficient large-cap markets, active managers can provide superior value in inefficient markets such as emerging markets, small caps, or niche bonds where mispricing is more common. This hybrid approach aims to capture the cost benefits of passive investing alongside the alpha potential of active research.