The skill of active fund managers "adds real value" to investors, but the market may need to improve at identifying that skill quicker, according to Investment Management Association (IMA) chief executive Daniel Godfrey.
In an exclusive video for Professional Adviser to kick off a new series called The Hard Questions, Godfrey tackles posers on the apparent march of passive investing, the impact of unbundled charges and the overall direction of fund pricing.
A passive-only market, according to Godfrey, "would break down". "There are active managers who demonstrate that they can add value through their skill," he says. "Perhaps we need a market that is better at identifying skill quicker, but nonetheless there is definitely skill out there that adds real value to investors."
Should the IMA do more to recognise the march of passive? Godfrey says the growth of passive "is understandable given market conditions", but he describes their take-up last year as "pretty stable, rather than growing".
The unbundling of charges across the fund management space is also dealt with. Godfrey says the IMA's view on whether this is for the long-term benefit of consumers is "neutral", but he says an immediate advantage is "it makes it clear what part of [the] pie we're taking".
What is The Hard Questions?
A video series hosted by Brendan Llewellyn, director of Adviser Home but also recognisable as Professional Adviser's Armchair Critic, featuring leaders from the financial services sector. Interviewees are not given advance notice of the questions that will be asked.
'We have better oversight'
50th anniversary of moon landing
Technical and behavioural factors
The Value Perspective