Can Active Fund Managers Be Replaced with Exchange Traded Funds?
Global Journal of Business Research, v. 13 (2) 95-104, 2019
10 Pages Posted: 2 Nov 2019
Date Written: 2019
There is a long-standing debate about whether active investment management can outperform a passive benchmark, usually expressed as an index. The debate is usually considered on the manager-level, comparing the active management return of a particular manager against an appropriate index. This paper looks at the topic on a portfolio level. Using the average asset allocation of a large, private foundation, this paper replaces managers with exchange traded funds that invest in a similar strategy. For 2017 the average portfolio return of the average, large private foundation (the actively managed portfolio) produced an average return of 14.3% compared to the portfolio comprised of exchange traded funds (the passively managed portfolio) produced a return of 11.9%. The active portfolio outperformed the exchange traded fund portfolio across every broad asset class.
Keywords: Active Investing, Passive Investing, ETFs, Active Versus Passive Investing
JEL Classification: G11
Suggested Citation: Suggested Citation