Divergence has advantages
The first trend – to take the bull by the horns, so to speak:
the popularity of passive strategies provides an opportunity
for real active management. In the bond sector, the
advantages of a deliberate deviation from the index are
obvious, as the largest borrower (not always the most solid
one) holds the largest weighting in the index. This applies to
German equities, too: since the low point in the spring of
2009, investors have been able to make up a lot of ground
against the DAX just by underweighting utilities and banks.
The prices of these two sectors are still below the level of
March 2009, while over the same period the DAX has more
than tripled. Even more opportunities are provided by multiasset
strategies, which have held first place by a wide margin in
European sales statistics over the last 15 years: an analysis
by AllianzGI indicates that European private investors have
entrusted around EUR 870 billion to this asset class since
2002. The built-in diversification and flexibility, i.e. the
opportunity for active reallocation, are the trump cards
that the asset class can use to its best advantage.
All this shows that even in a world in which the market return – beta – can be achieved cheaply via passive products, there is an opportunity for active strategies and active management. Even in the implementation of an investment strategy consisting entirely of passive instruments, most customers need “active“ support. In addition, it is a myth that investors always receive exactly the performance of the associated index with an ETF. The DAX, for example, is a performance index, which includes the dividends that are paid out. Since taxes are payable on dividends, however, a DAX ETF is systematically lower than the index. In the case of ETFs on less liquid market segments, such as high-yield bonds, index and ETF perform differently in difficult market situations, because some of the securities included in the index are no longer tradable. We last saw this situation in February, and as the ECB exits the corporate bond market, we may experience it more often. This suggests at least a more complex balance between active and passive management than we usually find.