Kumar said the supremacy of gargantuan US stocks like Facebook, Google, Amazon and Apple made it “very difficult for active managers to add a great deal of value”.
However, if shares outside of the mega-cap space looked set to overtake their larger cousins then you might find an environment where active managers could outperform, he argued.
Wealth managers may have the same entrenched views on the US active management industry today as they always have, but should they?
Looking at the total returns of active funds from the Investment Association North America sector between 20 January to the present using Financial Express Analytics, the result may be surprising.
The FE data shows that the average fund in the IA North America sector of mostly active funds delivered a 1.53% total return. In the same period the S&P 500 index return was just 1.11%.
So has Trump’s influence on markets given active funds the edge?
The reason for this outperformance has more to do with the cyclical nature of active management performance, said Canaccord Genuity Wealth Management CIO Michel Perera.
“It’s true, the US is a very efficient market. But people tend to forget that the issue of active managers is also a cyclical one,” he said.
“The last five years have been difficult for active managers in the US but the previous cycle wasn’t so bad for them. A lot of it depends on the correlation between stocks. In 2011, it was all about a top-down view. You were either buying the whole market or selling the whole market. In that kind of environment, it is very difficult for active managers to make money.”
