A few days ago (June 22, 2009) The Wall Street Journal ran an article (“Active Managers Get the Cold Shoulder”) that indicated that large, institutional investors are moving away from active managers.
In a bear market, active managers are supposed to protect investors from losses. However, a growing body of data indicates that these managers have not been able to provide this shelter. The executive director of the Illinois State Board of Investment noted, “Active managers have not given us the added performance in a down market that we had hoped for.” The board recently moved $400 million from some large and small cap stock managers to index funds.
There is $2.3 trillion in public pension plans. A large and growing portion of these funds are passively managed. These funds are able to hire very bright investment talent. The movement towards passive management is a very strong indicator that active management simply fails to deliver consistent long term returns that are greater than the unmanaged market delivers.
You don’t have to be an institutional investor to invest passively. CWM offers low cost passive investment management to the retail investor. We call it “Intelligent Investing” and we encourage you to explore it.
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