The CFA Society of Toronto held its 57th annual Fearless Forecast dinner last week. The legendary event lived up to its reputation. The ideas were hustled up fast and quick. The presenters were not afraid to get out on a limb and make some solid predictions. It was a thrilling night.
The presentation from Christian Stracke, managing director of the PIMCO Newport Beach office, member of PIMCO's Investment Committee and global head of the credit research group, can be found here
. Thanks to the CFA Society of Toronto for making this available.
One of the juiciest predictions of the night, however, came from Charles Brandes, the famed value investor and the founder and chairman of Brandes Investment Partners in San Diego. Brandes went big with a prediction that active-managed investment funds will make a big comeback over the next five years.
The past decade has seen a might move from active to passive investment vehicles. Investors have been buying up index-based ETFs in droves. But as growth in the global economy remains sluggish, markets will continue to move “sideways.” To play the sluggish markets, active management will be one of the ways investors will capture return.
Interestingly, Brandes quoted Andrew Haldane, the Bank of England’s executive director of financial stability, as suggesting that the massive shift toward passive investing has left investors dangerously exposed to any large market downswing. “The move into passive and tracking strategies increases the potential for investor herding and correlated market movements. Both potentially have implications for financial markets dynamics and systemic risk,” Haldane was quoted as saying.
In the years ahead, as investors recognize the problems with passive strategies—full exposure to falling markets—there will be a renewal of interest in active funds according to Brandes. But modern, forward-thinking ETF companies have already tuned in to this fact and have begun to offer actively managed ETFs. Have a look at the latest issue of Wealth Professional magazine for a major feature on the coming boom in actively managed ETFs, found here