Beware Passive Funds' Secret Fees

Over 15 years the MSCI AC World index has returned 152% to investors, while the average global actively-managed fund has returned 117% - but this does not include adviser fees

Emma Wall 13 January, 2017 | 1:49PM

“We like passive funds, we are truly agnostic when it comes to active versus passive,” says Rob Burdett, co-head of the multi-manager team at F&C, part of BMO Asset Management.

“But we are concerned that some adviser-led investors are actually paying more for passive funds than they would an actively managed solution – and are subsequently underperforming the market.”

Instead, Burdett advocates a fund-of-funds approach – professional investors using actively managed funds to add alpha and beat the market. It is hardly surprising that an active fund manager is talking up his shop; the actively managed fund industry is under increasing pressure thanks to the significant market gains of 2016 and every decreasing passive fund fees.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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