Ashley Owen, head of investment strategies at AES International, predicts active management will recover in performance terms in the near future.
“I would not be surprised to see active management outperform passive over the next few years,” he says. "It will be particularly interesting to see what happens in the next few years in the US and the UK as monetary policy tightens and market fundamentals return.”
AES International has quadrupled the number of ETFs and index linked funds on its White List, however, increasing from three to 12. “We have extended the range of ETFs and index-linked funds we recommend to clients to ensure we continue to meet the needs of our most cost-conscious clients” Owen says. ““We also want to ensure we have all major indices represented in our list of recommended funds.”
The criteria for selecting the funds rule out any which are synthetically backed, with no physical assets associated with them, as AES International believes this adds a largely unnecessary additional layer of risk to the fund. The firm also chooses funds that have the lowest tracking errors of comparable funds, seeking to get clients as close a match as possible to the chosen index.
Owen says: “ETFs and index linked funds are hugely important products for clients to have in their investment toolkit as they provide low cost access to markets. They can be extremely efficient, particularly in rising markets when some active managers struggle to beat the index.”
However, their faith in active managers continues; Owen says: “They are able to add real value in certain market cycles.”
The nine new ETFs and index-linked funds are:
iShares MSCI Emerging Markets – ETF
– iShares MSCI Japan – ETF
– iShares MSCI Pacific ex Japan – ETF
– iShares Euro Corporate Bond – ETF
– iShares Core £ Corporate Bond – ETF
– iShares Index Linked – ETF
– Vanguard US Investment Grade Credit Index – Index linked fund
– Vanguard European Government Bond – Index linked fund
– Vanguard US Government Bond – Index linked fund