Active tactics are out in the cold

You have money to invest in the stock-market and you want it invested professionally. Do you put it in managed funds that may outperform the market but probably won’t, or in passive funds that move with a given market benchmark?

There was a time when active fund managers had it good. The value proposition was simple: you pool your money with other investors’ funds, which is then invested by professional portfolio managers whose expertise – it’s hoped – generate superior returns.

“By pooling in with others, retail investors get scale advantages,” says Alex Dunnin, director of research at Rainmaker Information, which publishes Money. “It’s a killer-app of an idea.”

Then along came exchange traded