Professional Adviser Debates
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Julian-marr-002-80x80 Moderator

Julian Marr

Moderator

Moderator

So there we have it. Our four days of debate on the question of whether an obsession with cost at the expense of value risks obscuring the benefits that active management can offer investors is over - but who has emerged victorious?

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Closing Statement

Proposer Darius-casual-80x80

Darius McDermott

Managing director, FundCalibre

In the blue corner

Well, we almost made it to the end without the perennial obsession with fees starting to dominate the debate, but the first half of Hector's rebuttal was on that very subject - conveniently focusing on the most expensive funds and forgetting to mention that adviser fees would be payable on any type of strategy, not just active investments ...

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Opposer Hector-mcneil-2016-80x80

Hector McNeil

Co-CEO, WisdomTree Europe

In the pink corner

The world of investment opportunities has changed irrevocably for the better over the past 20 years and even more substantially over the past 10. The initial shift into passive investment strategies has benefitted investors through greater predictability of returns relative to the benchmark and a move to lower-cost investment solutions ...

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Chris-fry-80x80 Julian-marr-002-80x80

Julian Marr

Editor, Professional Adviser

Moderator

Many, many thanks to Darius and Hector, who have finished making their cases and, with out poll closing on Friday afternoon, now await your final judgements - and votes. It would appear, however, that I have already been judged - and apparently found wanting ...

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Rebuttals

Proposer Darius-casual-80x80

Darius McDermott

Managing director, FundCalibre

In the blue corner

More choice and greater competition is always good for consumers and, as such, we also welcome the increas-ing number of passive and smart beta products. We do, however, refute the idea that smart beta represents the "best of both worlds" and will demonstrate conclusively that active management provides significant potential benefits that cannot be replicated by any form of passive investment ...

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Opposer Hector-mcneil-2016-80x80

Hector McNeil

Co-CEO, WisdomTree Europe

In the pink corner

In a low-return environment investors are becoming increasingly focused on costs and, as Darius says, "the figure that really matters is returns after fees". We are, in fact, seeing that investors are looking at this bottom line - the total return of any investment strategy. This is just as applicable for active strategies as it is for passive ones and reflects the reality that cost-efficient vehicles and index strategies are more widely available - typically via ETFs - than has historically been the case ...

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Chris-fry-80x80 Julian-marr-002-80x80

Julian Marr

Editor, Professional Adviser

Moderator

As we reach the halfway stage of this Professional Adviser Debate, it is good to see that not every discussion of the relative merits of active and passive investment has to descend into the sort of slanging match one has grown used to witnessing between the more die-hard supporters of each camp ...

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Guest Phase

Haynes-gavin-2015-80x80 Chris-fry-80x80

Gavin Haynes

Managing director, Whitechurch Securities

Guest

Darius McDermott and Hector McNeill have already each provided compelling arguments in their opening salvoes of the Professional Adviser Debate on the ‘cost versus value' aspect of active and passive investing - and yet both seem willing to accept there is a case for considering both styles when building a portfolio ...

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Opening Statements

Proposer Darius-casual-80x80

Darius McDermott

Managing director, FundCalibre

In the blue corner

If you were to believe the headlines, fund managers are a bunch of overpaid, greedy, useless so-and-sos. In recent years, the volume of noise advocating passive index-tracking products has grown and grown. Academics have led the charge, publishing numerous studies extolling the benefits of passive investments. Mainstream media have been all too happy to chime in and encourage the idea active fund management is an expensive waste of time ...

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Opposer Hector-mcneil-2016-80x80

Hector McNeil

Co-CEO, WisdomTree Europe

In the pink corner

Passive index funds have come to dominate the investment choices of many large-scale investors and have gone from relative obscurity to being widely recognised, not only because they are low-cost but also because they are transparent and one of the most efficient means of gaining exposure to a range of asset classes ...

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Chris-fry-80x80 Julian-marr-002-80x80

Julian Marr

Editor, Professional Adviser

Moderator

Active investment is a complicated matter and so, less obviously perhaps, is passive. And despite what the more fervent supporters of either ‘camp' might have us believe, complicated matters have both their pros and their cons. Neither is perfectly good, neither is unremittingly bad and anyone involved in investment should be able to countenance that idea - not to mention the possibility both active and passive can have a place in portfolios ...

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At a glance

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65%
35%

61%
39%

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About this debate

The so-called ‘active versus passive' debate - so beloved of certain elements of the media - has echoes of the arguments currently raging through homes, offices and pubs throughout the country over the UK's continuing membership of the European Union. No, really - bear with us ...

In common with the shoutier supporters and opponents of ‘Brexit', the most fervent members of the active and passive camps seem certain all the arguments are on their side and that, if only they can beat the doubters around the head with them enough, they can convince the world. Of course, the much greater likelihood is that they just end up putting people off thinking about the subject.

Regardless of what that means for the 23 June referendum, in the context of financial planning, this sort of partisanship is unhelpful, unattractive and, at a time when some - any - kind of investment is the only hope for people to enjoy a comfortable retirement, potentially pretty harmful.

In truth, however, most investment commentators now accept ‘active and passive' trumps ‘active versus passive' - hence the rather more nuanced point under discussion in this latest Professional Adviser Debate.

As the week progresses, FundCalibre managing director Darius McDermott will propose the motion that an obsession with cost at the expense of value risks obscuring the benefits active management can offer investors, WisdomTree Europe co-CEO Hector McNeil will oppose it and Whitechurch Securities managing director Gavin Haynes will offer his thoughts on both sides of the issue. That, at least, is the theory ...

What is not in doubt is how keen we are to hear your own thoughts on active and passive investing and, along the way, for you to cast your vote for either Darius or Hector. You can change your vote at any time, and we will be sharing the results of our debate at the end of the week.

We hope you find the whole discussion interesting, informative and, dare we say, entertaining.

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