How is the Covid 19 crisis changing the debate of active vs passive investing?

17 February 2021

– Amid crisis, both investment styles have proven their resiliency. Active funds have confirmed their ability to better perform during a crisis while passive strategies have also passed the March 2020 crisis test successfully with no major liquidity issues.  

– The trend toward sustainable funds has benefited to both active and passive funds with flows respectively up 103% and 45% (in Europe, source Morningstar Dec 2020).

– Not surprisingly active equity fund flows have been the big winners during the pandemic (see previous posts). In a changing environment, active managers are helping selecting companies with the best outcomes taking into account new alternative data sets prompted by the pandemic or avoiding those with the worst outcomes. Passive strategies on their side continue to attract investors who focus on costs, liquidity, and research innovation.

👉After a decade of bull market, the Covid 19 crisis has put back in the forefront the differentiating role of each investment style. Both active and passive management styles have a role to play to optimize portfolio performance and care must be taken in selecting each of them.

Marlene Hassine Konqui