What most active versus passive debates miss
Outperformance is only one of the factors investors should consider - and it is not the most important
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DO active funds outperform their passive counterparts? From the 1970s, when passive funds first launched, up until today, when their assets under management (AUM) have overtaken those of active funds, the active versus passive debate has centred on that question.
But this is only one of the issues that investors have to consider - and it is not the most important. The other considerations are more critical for two reasons: because they help us understand the first principles of the debate, and because they elevate that debate from the theoretical to the practical.
When it comes to the choice between active and passive, both the professional and retail investors among us have at least three questions to consider:
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