October 2015: Active vs. Passive Management

The October Mutual Fund Monitor – Advisor examines all educational materials related to active management from the advisor-facing websites in our coverage group. In recent years, many investors have been concerned with keeping costs low, which has spiked the popularity of ETFs. This presents a challenge for asset managers, who need to convince advisors and investors of the value of active management. Our report serves as a catalog of the current landscape; therefore no grades were distributed. We considered the following parameters in our analysis:

  • Accessibility/Marketing
  • Format
  • Discussion Topics

The debate surrounding active versus passive management is referenced by 89% of coverage group firms. Sixty-eight percent of firms explore the active share measure. Trailing this topic is smart beta, referenced by 57% of firms. All of the coverage group firms offer some level of resource specifically discussing active management. Twenty-six percent of firms offer dedicated sections that consolidate all significant materials on active management. About 73% of firms promote content on active management on the homepage via images or links. The different business models employed by individual asset managers greatly shaped the discussions each firm presents on active management. Our research finds that 68% of firms explicitly name active investing as their main investing approach through their About Us pages. Asset managers and firms should be transparent and explicitly state why they have adopted a certain strategy and what the benefits of the strategy are. Hartford Funds’ slogan “Think Independently. Invest Actively,” for example, offers a straightforward proclamation of the firm’s approach.

Advisors seeking information on active management from asset managers will encounter a variety of resources. The most common tool firms use to discuss active investing is commentaries, with 89% of firms providing these. Lord Abbett is a leader in this area and offers a wide range of commentary. White papers are also common, with 78% of firms offering at least one mention of the subject and AB and Franklin Templeton doing so on microsites. Around 57% of firms offer videos on active investing. Twenty-one percent of firms offer infographics to illustrate strategic concepts.

Of the 19 Mutual Fund Monitor-Advisors firms included in this report, we noted the following key findings:

  • 26% offer sections exclusively dedicated to organizing relevant resources
  • 89% examine the active versus passive debate
  • 68% discuss active share
  • 68% express view of strategy on About Us sections
  • 89% offer commentary on the subject
  • 78% supply white papers
  • 57% offer videos