Is there a propoganda war against active funds?




The tweet set the scene. Funds Fanatic had complained that the FT were reporting the HL numbers disparagingly.

Certainly the FCA would agree with the FT that more Hargreaves Lansdowne investors should be using passive funds. Funds Fanatic is the soubriquet of Citywire’s Editor in Chief Gavin Lumsden. Citywire have good reason to keep active managers in the game but I don’t think Gavin’s arguing from an advertising standpoint. He is standing up for the rights of poeple to choose active management as it suits them.

Passive propoganda!

It’s not just the FT – whoever you read or listen to – other than the funds’ trade press- is arguing against active management.

My point, made on this blog before, is that people invest in active funds for behavioural not purely economic reasons.


I don’t see anything wrong with people paying for the possibility of outperformance. Betting on alpha is no different from any other kind of betting. You know the odds are against you, you do it anyway. It’s fun.

Why people find it fun trying to pick an outperforming active manager is beyond me. I prefer to waste my money on horses on boats, and those who know how expensive horses and boats are , will say “more fool you”.

So long as people know when investing with active managers that they are betting not investing (at least on the alpha), then why not. Life really is too short to take every decision on an economic basis!

The money that sits on fund platforms like Hargreaves Lansdowne is generally liability free, it is the investable amount above the core savings in retirement products needed to maintain independence, it is money that people happily punt about the market.

What is different is when core money, money needed to keep destitutioin from the door, is invested in the vanity funds that make up the majority of the Hargreaves Lansdowne 100. Where money is being made “actively” is by the proprietary desks of the investment banks, by the hedge fund managers , the forex dealers, they are making money for themselves. They are making money from trading and their activities are speculative. They are keeping the costs of their trading to a million as their bonuses depend on it.

Like the professional gamblers – who are seldom seen on a racecours – the insiders who manage money actively are trading behind the scenes. They partially depend on the money in active funds against which they can take positions. The reason why so many active fund managers fail to meet even the market benchmark is tht they are constantly being turned over by the professional traders (also the reason why it is hard to make money gambling on horses).

I love gambling, I even own the odd leg of a horse, but I do so with the money that isn’t needed for my personal liabilities (retirement-family- sickness fund).

So long as we recognise that active fund management is great fun but unlikely to make us as much as a passive alternative, then let’s pay for the fun. The FT should stop being po-faced about active mangement and start promoting it for the bit of fun it is.

Ultimately it’s the city’s way to extract it’s pound of flesh from the wealthy and so long as active management is targeted at those who see selecting fund managers as an amusing past-time -why not?







About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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