‘Distortions’ Mean Stock Pickers Are Back, Says Goldman’s CohenInyoung Hwang
Stock pickers are on their way back, said Goldman Sachs Group Inc.’s Abby Joseph Cohen.
“It’s a raging debate and something that might not get resolved in 2015, but it will get resolved towards active management,” Cohen, president of Goldman Sachs’s Global Markets Institute, said in an interview with Bloomberg’s Tom Keene. “With all of the movement into ETFs, index-oriented approaches and so on, some real valuation distortions have developed. Active managers will be in the best position to take advantage of that.”
Exchange-traded funds have become more influential in the trading of individual stocks, according to a Goldman Sachs report this month, which noted how ETF demand makes up about 83 percent of average volume for a smaller company like Hecla Mining Co.
Last year was a lackluster one for active money managers, with investors instead opting for cheaper passive funds that track indexes. The Standard & Poor’s 500 Index in 2014 posted its third-straight annual advance above 10 percent, yet only 25 percent of actively managed equity mutual funds beat their benchmarks, according to data from Morningstar Inc. That’s the lowest rate since 1995.
This year may swing in their favor. Through March 6, 55 percent of active managers topped their measures, the best start since 2012, data compiled by research firm Fundstrat Global Advisors show. U.S. equities have meanwhile struggled versus other developed-market stocks.
One concern, Cohen said, is that as active managers do their own research, professional analysts -- those who study the businesses and valuations of individual companies -- aren’t being rewarded for their work.
In response to a comment by Janus Capital Group Inc.’s Bill Gross that the 10-year German bund is the “short of a lifetime,” Cohen said she’s found no 10-year government bond that offers value.