The need for market-beating actively managed funds to get the word out about their performance success has never been more urgent.
The fee compression created by the proliferation of passively managed ETFs has actively managed mutual fund assets slip-sliding away.
But perhaps the most compelling evidence of investors' dwindling confidence in active management was presented last weekend at Berkshire Hathaway's annual shareholder meeting hosted by Warren Buffett.
Craig Lazzara , Managing Director and Global Head of Index Investment Strategy for S&P Dow Jones Indices, researched the historical performance of Berkshire Hathaway compared to the S&P 500 and uncovered some astounding data.
Buffett's status as perhaps the best active investor in the last 50 years has started to tarnish. As Lazzara notes, $100 invested in Berkshire stock at the end of 1968 would have grown to more than $850,000 by the end of 2018; a comparable investment in the S&P 500 would have grown to just under $11,000.
But, as it does with every investment strategy over time, the market has caught up with Buffett and, by some measures, surpassed him. There are 40 (overlapping) 10-year performance windows in a 50-year comparison of Berkshire against the S&P 500.
In the first 20 of them, Berkshire beat the S&P 500 by more than 10% per year. In the second 20, Berkshire’s margin of outperformance hit double digits only 3 times; the last such period ended in 2002. Berkshire’s compound annual return actually lagged that of the S&P 500 in the 10 years ended 2018.
Those numbers present another warning sign for active managers, many of whom can add to inflows and/or stem the tide of outflows with a steady focus on sharp content creation.
One proven way is through the use of ProFUNDity, a concept that provides a clear and thorough understanding and ability to provide thoughtful and timely insight in all communications with financial advisors and investors regarding mutual funds, ETFs, hedge funds, and closed-end funds.Related: How ProFUNDity Can Help Actively Managed Funds Increase Market Share
ProFUNDity is expressed as a statement or idea that shows great knowledge and experience in presenting highly specialized and often complex information on investing in layman’s terms.
There are many ways for active managers to convey their message of successful investing , whether it be through traditional media, social media, or other means.
When an investor like Warren Buffett starts providing marginal value to a passively managed index such as the S&P 500, it's time for active managers to take a stand and tell their story.