An oft-repeated claim of the beleaguered active management industry is that savers who’ve opted for low-cost index trackers in recent years have been lulled into a false sense of security by ever-rising equity markets. The stockpickers argue that when the ride gets rocky, their financial acumen will generate alpha that’s far superior to the beta available from simply accepting whatever the broader market can deliver.
The current wild environment, with benchmark indexes swinging between outsized gains and losses often within a single trading session, should offer the perfect testing ground for those assertions. But I’m skeptical as to whether active managers can redeem their collective reputation — not least because their underperformance in recent years has become so very, very marked.
