Active management has had a bad rap in recent years, but I expect the winds are beginning to change and a period of improved relative performance lies ahead. There are five winds to note: Two are heavy headwinds lessening in strength, and three are seasonal headwinds set to become tailwinds.
First, what exactly is active management? And, what is all the fuss about “passive versus active” management that generates so many headlines and articles?
In my opinion, there is too much chatter and ink spilled on the “active versus passive” debate and thus a lot of confusion among investors. There are a few topics here rolled into one — the most significant being the move from actively managed mutual funds to ETFs. It’s a complex subject, and I believe understanding can be clearer if we are all on the same page, first regarding how the terms are defined.