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Rekenthaler Report

Have Active Managers Given Active Management a Bad Name?

If truth be told … yes.

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The Debate
Two weeks back, Barry Ritholtz of Ritholtz Asset Management and Nir Kaissar, a Bloomberg columnist, discussed the merits of active versus passive investing. The debate's outcome was a foregone conclusion; these days, few if any investment writers wholeheartedly support active management. They either recommend passive investing fully or they advocate blending the two approaches, typically by starting with a core of passive investments and then adding active funds as desired.

Ritholtz and Kaissar each chose the latter path. Each also suggested that active management be mostly in the form of strategic beta. That is, they maintained that instead of trading securities freely, as active fund managers traditionally have done, managers should use investment strategies that follow mechanical, preset rules. The ideas are human, but the execution is a computer's.

John Rekenthaler has a position in the following securities mentioned above: VTI. Find out about Morningstar’s editorial policies.