UK - Active managers have reacted angrily to claims that they are "hugging the index" and not doing their job properly.
The row flared after Bank of Ireland Asset Management warned pension funds over paying active management fees to firms which are “closet index trackers”.
BIAM UK managing director David Boal claimed the performance figures of many active fund managers were still hovering around their relevant benchmarks.
This, he said, indicated that their holdings were very close to the index which should not be tolerated by pension funds.
But Chiswell Associates head of UK equities Nick Bensted-Smith stressed that active management was not about taking “extreme” positions.
He said: “It’s easy to have a portfolio that looks similar to the index. You don’t need an awful lot of difference in stock selection to get a significantly different return on investment.
“If you want something that is benchmark plus-5% per annum you have to take a large position against the market. But if you want benchmark plus-1% the position is likely to be similar. Active management is about catering for the requirement you are given not just taking extremes.”
He added that active managers taking a more extreme position would expect performance-related pay – so overperformance comes at a cost.
Baring Asset Management head of institutional investment Jenny Segal said: “Active management is not something you can take a snapshot view of.
“You have to look how the manager is positioned over a period of time. Fund managers will only take extreme positions when they have high levels of conviction.”
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