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CAN ACTIVE FUND MANAGERS BE REPLACED WITH EXCHANGE TRADED FUNDS?

Jeffry Haber

Global Journal of Business Research, 2019, vol. 13, issue 2, 95-105

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2019
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