As fund selectors continue to battle the challenges which passive funds throw at them, one investment professional highlights why fund selectors need to be patient and accept temporary underperformance.
Selector: Steffen Bermanseder
Company: Deutsche Bank
Given the importance of ETFs today, some pockets of the market are heavily driven by passive flows. Quality-driven and valuation-sensitive active equity managers might, therefore, be challenged in the short term.
We as fund selectors need to evaluate this; be patient and also accept a temporary underperformance if the investment style of the manager is currently not favoured.
We still believe in active management and think that over the mid- to long-term, experienced investment teams and good portfolio managers concentrating on their field of expertise should have an advantage over passive investing.
There are of course also good reasons for passive investments, such as a being cheaper short-term investments, but that doesn’t automatically threaten the best longer-term-oriented active managers we like.
We continue to focus on selected growth pockets within themes like artificial intelligence, automation, and digitalisation but are closely monitoring valuations as well.
Also, we continue to selectively grow our actively-managed impact and ESG offering, as we think this is a growing area of interest to our clients. On the other side, we are well prepared with lower beta and more defensive fund solutions in case of any larger equity market correction.