Burnett said benchmark investing had become increasingly "wrong" over the past decade, with too many active mangers focused on delivering the index plus 2% – a return often wiped out by a fund’s TER.
He said the sheer number of active funds investing in UK equities made it one of the most competitive markets to try and add alpha, and said more fund houses should close down their offerings in this space, as Martin Currie did two years ago.
"There are very few groups out there that can be all things to all investors and they need to focus on what they are good at."
In much the same sentiment as that shown by Newton’s Iain Stewart last week, Burnett said passive investing was the way to go in the twenty years from 1980, when every asset class was broadly going up.
"I do not think active investing has covered itself in glory in the past 25 years and a lot of fund managers have confused luck with genuine returns. If the index goes up 17% and you go up 15% have you done a good job? Most people would not grumble at that, but when indices go down that is when betting on the index is not a great result.
"Be properly active, get the risk into the stocks and do not hug the index. We need to get away from the idea that as long as you go up 12.2% when the index is up 12% that’s fine."
He said in UK equities there are too many funds that are pretty average because genuine active management in that space is tough.
"It is the most expensive sector to hire for, and good UK fund managers are gold dust."
Burnett admitted some UK managers, such as Schroders’ Richard Buxton and Invesco Perpetual’s Neil Woodford were worth paying for, as they ignore the index and demonstrate they know what risks they are taking, but he thinks by and large the sector fosters mediocrity with its benchmark-hugging mentality.
