Last year’s economic backdrop proved prosperous for passive products, one reason the TMI asset allocation team decided to invest one third of portfolios in trackers.
“It’s an interesting time for us,” said Herberts, who heads the private investment management division.
“We normally carry a reasonable allocation to passives, but last year we ended up carrying more passives exposure to various parts of the market.”
It was this slightly bigger bias toward passives that actually lifted the overall performance of the portfolio last year, particularly at the start of 2016 when active managers struggled to outperform their benchmarks.
But this year, Herberts and the team believe they are witnessing “a slight swing in the pendulum” across certain markets, the UK included, that could indicate a healthier environment for active managers.
Currently, the team is in the process of “consciously taking more active risk into the portfolio” and widdling down the total passive exposure to 25%.
Herberts isn’t alone in his prediction that the current economic client are more conducive to an active investment strategy.
If bond and global equity cycles have reached their zenith and markets remain jittery, it will be harder for passives to come out on top, or so the argument goes.
