The Active vs Passive Management Research

What is "Active"& "Passive" management? The discussion of active and passive management is regarding the strategyi of the fund/manager. Active managers "actively" choose a strategy to outperform the share market with their fund (group of shares or portfolio). A passive manager follows the broad market, such as the U.S. or N.Z. share market, e.g. NZ50, S&P 500. Active funds require more analysis, so the fees (cost) are usually higher than a passive manager.

THE PASSIVE INVESTMENT SIDE

SPIVAii reports have been following funds worldwide to see how each type of fund manager has performed. They consider the benchmark the equivalent to passive funds. They found that a majority of Active funds underperformed their benchmark. The below image gives a worldwide snapshot of Large Cap funds2 that underperform in each country. They have 20- year-old data that offers a bleaker picture, e.g. In the U.S. market was, 94% of active managers underperformed the benchmark.

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