Fight Club Round 1 - Active versus Passive Investing

Welcome to Fight Club! For Season Two of the NFO podcast, step beneath the surface to debate the difficult issues facing asset management. Time to take this underground!

Each round is a panel debate of two teams, one captain per team plus 2 team members. 
 
Active versus Passive 🥊 💥 Round 1

Active captain Simon Evan-Cook will be joined by Lucy Walker, CFA and Ben Conway 💥
Passive captain Mark Northway will be joined by Robin Powell and Larry Swedroe 👊

Equal time allocated, rapid debate. Each team will be allocated circa 25 minutes total time, monitored by JB. When each team is talking then time will automatically count down. If the team runs out of time then the remaining time is handed to the opposing team.

Audience: Fund selectors, family offices, multi-managers, advisers, allocators, gatekeepers and distributors. We appreciate that there is already a high volume of podcasts and that fund selectors are heavily marketed to, however we believe that within this niche there is little competition and significant demand for content of this type. Given this gap I believe that it is the time to use the format of a podcast to bring together the community to discuss hot topics that are all too often led by partisan echo chambers and only discussed in opposing vacuums!

1) Can anyone truly be a passive investor? Aren’t we all different shades of active? Few buy a naive portfolio, whether it is market cap, factor investing, systematic strategies, SmartBETA?

2) Have we reached or will we reach “peak passive”? Did passive just get lucky with Big Tech or is the success of index investing just common sense?

3) Thinking the behavioural biases at play, is the concentration of assets around Star Managers the best argument for Active or Passive?

Fighter Bios

Captain Team Passive: Mark Northway, investment manager at Sparrows Capital, NED and consultant.

Larry Swedroe, Principal and Director of Research at Buckingham Family of Financial Services.

Robin Powell, Journalist, investor advocate, financial educator & content consultant. Head of client education at RockWealth, Editor for 'The Evidence Based Investor' blog, Executive Director of Regis Media and Ember Television.

Captain Team Active: Simon Evan-Cook, Manager of Multi-Asset, Multi-Manager Funds & Citywire Columnist. Blogs at nevermindthesilverbullets.com. Fund Manager, Downing Fund Managers.

Lucy Walker, Giving fund research teams the tools they need to succeed | Founder at AM Insights | Deputy Chair at Aurora | NED at HINT | Co-CEO at Changing Digital.

Ben Conway, Head of Fund Management at Hawksmoor Investment Management.

Teaser trailer 📺 here: https://youtu.be/riH7fopTN-U

Credits: Session recorded in Microsoft Teams. Sound effects by Zapsplatt.com. Images by Pixabay.com. Creativ

Produced by New Fund Order


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Chapters

• 0:00 Intro - Fight Club
• 0:15 Intro and Welcome by JB Beckett
• 1:21 Question 1 - JB - Can anyone be Passive or are well all Shades of Active?
• 1:38 Question 1 - Mark Northway - Defining 'Passive'
• 1:59 Question 1 Larry Swedroe - No Universal Definition
• 5:26 Question 1 Simon Evan-Cook - Anything other than Tracking is Active
• 7:55 Question 1 Robin Powell - Labels
• 9:41 Question 1 Larry Swedroe - Nobody is Purely Passive
• 11:04 Question 1 Lucy Walker - Alpha?
• 12:59 Question 1 Ben Conway - Evidence-based Investing is not just Passive
• 14:32 Question 1 Simon Evan-Cook - A Question for Passives
• 14:55 Question 1 Mark Northway - Traders v Market Makers
• 18:58 Question 1 Larry Swedroe - Illiquid asset classes & Systematic
• 19:53 Question 2 - JB - Have we reached Peak Passive?
• 20:07 Question 2 - Simon Evan-Cook - Not bothered
• 20:50 Question 2 - Lucy Walker - Industry Focus on Costs has been a tailwind
• 21:26 Question 2 - Larry Swedroe - incredible shrinking Alpha
• 25:34 Question 2 - Ben Conway - Strawman being knocked down
• 27:49 Question 2 - Mark Northway - No Alpha Deniers, identifying ex ante
• 30:05 Question 2 - Simon Evan-Cook - Academic studies
• 33:20 Question 2 - Mark Northway - Tim Jenkinson study of Consultants
• 33:47 Question 2 - Larry Swedroe - Many studies into Consultants
• 35:13 Question 2 - Robin Powell - evidence: the 1%, not entitled to our own facts
• 37:14 Question 2 - Lucy Walker - Boxing gloves out, collective is not illustrative of micro
• 39:56 Question 2 - Robin Powell - scale of global financial markets, millions of investors
• 40:39 Question 2 - Simon Evan-Cook - Vanguard active track record
• 42:07 Question 2 - Larry Swedroe - studies into Vanguard differs on magnitude of Alpha
• 46:15 Question 2 - Ben Conway - problem with aggregate studies
• 48:44 Question 2 - Mark Northway - Active Share Debunked as Predictor of Alpha
• 49:06 Question 2 - Larry Swedroe - Patijesto paper data disclosed
• 50:10 Question 2 - Ben Conway - undeniable that there is identifiable talent but not persistent
• 51:22 Question 2 - Larry Swedroe - Vanguard study, 4-factor basis, 80bps down to 10bps on multi-factor
• 53:05 JB - Vanguard?
• 53:12 Question 3 - JB - Star Managers, pro Active or pro Passive?
• 53:47 Question 3 - Simon Evan-Cook - contentious, size, Angus Tulloch
• 56:15 Question 3 - Robin Powell - random chance
• 58:26 Question 3 - Lucy Walker - Woodford
• 1:01:31 Question 3 - Larry Swedroe - improve odds by following rules
• 1:03:17 Question 3 - Mark Northway - retail v institutional
• 1:05:21 Question 3 - Ben Conway - newspaper of funds, don't bother
• 1:07:46 Question 3 - Robin Powell - most important factor is cost
• 1:08:27 Question 3 - Simon Evan-Cook - average active has thrashed footsie in UK - flipping the coin
• 1:10:14 Simon Evan-Cook - a question
• 1:10:56 Larry Swedroe - a bad question
• 1:12:34 JB - time check
• 1:12:46 Question 3 - Mark Northway - two flavours
• 1:14:17 Question 3 - Lucy Walker - not a question of active-passive
• 1:15:01 Question 3 - Mark Northway - active decisions after allocation?
• 1:15:18 Question 3 - Lucy Walker - allocation significant contribution
• 1:15:45 Question 3 - Larry Swedroe - dispersions between funds
• 1:17:20 Question 3 - Simon Evan-Cook - small value factor
• 1:19:52 Closing remarks - Mark Northway - Identifying Skill v Time & Cost
• 1:21:06 Closing remarks - Simon Evan-Cook - Hard work and intelligence can beat the Average
• 1:21:31 Closing and thanks - JB
• 1:22:00 Outro