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Can Active Fund Managers Be Replaced With Exchange Traded Funds?

Author

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  • Jeffry Haber

Abstract

There is a long-standing debate about whether active investment management can outperform a passive benchmark, usually expressed as an index. The debate is usually considered on the manager-level, comparing the active management return of a particular manager against an appropriate index. This paper looks at the topic on a portfolio level. Using the average asset allocation of a large, private foundation, this paper replaces managers with exchange traded funds that invest in a similar strategy. For 2017 the average portfolio return of the average, large private foundation (the actively managed portfolio) produced an average return of 14.3% compared to the portfolio comprised of exchange traded funds (the passively managed portfolio) produced a return of 11.9%. The active portfolio outperformed the exchange traded fund portfolio across every broad asset class

Suggested Citation

  • Jeffry Haber, 2019. "Can Active Fund Managers Be Replaced With Exchange Traded Funds?," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 13(2), pages 95-105.
    • Handle: RePEc:ibf:gjbres:v:13:y:2019:i:2:p:95-105
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    More about this item

    Keywords

    Active Investing; Passive Investing; ETFs; Active Versus Passive Investing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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