Deutsche joins active vs passive debate
Deutsche Asset Management (DAM) has entered the continuing debate of active versus passive investment, saying competition between the two is a ‘myth’.
Speaking at an adviser briefing in Sydney this morning as part of an ongoing roadshow, DAM head of retail Bruce Murphy says the debate about the respective merits of active versus passive indexing has obscured the fact that the two are not competing styles.
He says the idea of competing is a myth and the real issue is how fund managers add value, by how much and what risks they take.
“The trend to active resulted because over the last 10 years the median active manager beat the benchmark. This means there are some skilled managers but probably also there are some market efficiencies in place,” Murphy says.
DAM has a number of alternative investments using elements of passive management, mostly enhanced indexing used by the group’s two absolute return funds, the Deutsche Global Equity Long/Short (GELS) Fund launched last month, and the Deutsche Strategic Value Fund.
Murphy says the reason for an enhanced indexing position in some funds is the outperformance element, with the Deutsche enhanced index funds aiming for a 0.75 to 1.5 per cent excess return over the benchmark while still holding the risk characteristics close to the benchmark.
“The outperformance target is the key which makes it a low risk active fund. In doing that we are indentifying the easy bets where we know we can get a win,” Murphy says.
He says this type of fund should be attractive to financial planners and their clients because it provides a shorter timeframe for the investments to be successful in a low return environment.
DAM strategy head David Zobel says interest in the newly released GELS fund has taken off as returns have dropped with advisers being told that returns would probably stay in the single digits, around 9 per cent.
AUTHOR
Jason Spits
Recommended for you
The financial advice industry has enjoyed another week of strong new entrant numbers, totalling nearly 40 for the past fortnight, thanks to the latest exam passes.
Momentum Media’s wealth publishing network – comprising InvestorDaily, ifa, SMSF Adviser, Money Management, and Super Review – is proud to launch the annual Australian Wealth Management Awards.
Investment information firm Equity Story has signed a binding heads of agreement to acquire South Australian financial advisory and stockbroker Baker Young for $4.2 million.
Net cash flow on AMP’s platforms saw a substantial jump in the last quarter to $740 million, while its new digital advice offering boosted flows to superannuation and investment.
