The market share of passive funds continues to make new highs in Europe, with ETF’s experiencing a further €45bn net inflow in 1Q24 and index funds seeing a net inflow of €13bn in April alone (Source: Morningstar Direct Compass) which contrasts with a €1.9bn net outflow from active funds for the month. As an active long-only investor, this presents two challenges for you: i. How to preserve/grow your AUM against the threat of investment products with an inherently lower cost base; and ii. How to differentiate your offer from other active managers. Performance is clearly key to both of these, and it is increasingly difficult for active managers to deliver consistently superior returns both against their competition and the market.
We observe a decreasingly differentiated returns profile amongst active managers, and note that with 95% of research being consumed by the buy-side coming from a handful of conflicted providers with a propensity to deliver Buy recommendations and not to fully assess downside risks presented by areas such as accounting and governance; this is perhaps little wonder. At The Analyst our process derives fresh perspectives from under-researched sources; with our content thus delivering to you actionable, differentiated ideas that are far from your madding competitors’. And with downside risks being assessed through our core skillsets of forensic accounting, fieldwork, and governance analysis, our product is just as valuable in helping you avoid the losing positions that could be widely owned, as it is in helping you identify the winners that they don’t.
