The manager of Fidelity’s multi-manager growth fund prefers actively managed funds to passive funds as most of the fund’s returns are generated by manager selection rather than asset allocation.
Fund manager Ayesha Akbar says around 70 per cent of the returns from Fidelity multi-manager growth are generated by manager selection and the remainder come from asset allocation. She is not against passive funds but feels there are times to use them and times when active management is the better option. In Fidelity multi-manager growth, she holds an exchange traded fund to gain exposure to gold but says ETFs and other passive funds are not suited to every asset class at all times.
For example, Akbar researched US managers in 2009 and concluded that it was not a good time to use a passive approach. The performance of the S&P 500 index was poor at the time, so a fund that tracked the index would have performed badly.
Akbar says she has also looked at ETFs to gain exposure to areas such as frontier markets. However, cost was an issue and she felt the ability of the ETF to track the market was not great. She says that issues surrounding ETFs, such as the different structures, the collateral they hold, costs and the various indices they track, mean investors have to do their research carefully.
Akbar feels that Fidelity’s ability to negotiate charges on actively managed funds is an advantage, particularly as volatility is providing these managers with good investment opportunities.
She says: “The core things are that active management does work and that no one asset class performs at all times over the medium term. I am taking a cautious view at the moment. It has been a difficult year for asset allocation and I do not want to take any big asset allocation decisions.”