Passive Managers have been having a super time over the last few years. But the skies are brightening for Active players. In the year to June 2017 over half of all US equity mutual funds outperformed their benchmarks, according to the latest flagship scorecard from SPDJI released last week. Equity hedge funds are also enjoying a welcome hot streak. On average they have gained 8.6 per cent this year, according to HFR, the research group, making this the strongest run in four years.Could this be the beginning of a cyclical change? And what impact will this have on asset allocation?
Next January the Omaha branch of Girls Inc, a venerable charity dedicated to helping young women across the US, will receive a $1m cheque in the mail from a New York hedge fund, after a bet entered into a decade ago went horribly awry. The wager was struck between Warren Buffett, the billionaire “Sage of Omaha”, and Ted Seides of Protégé Partners, on whether a Vanguard fund that simply tracked the S&P 500 would beat a basket of hedge funds. The result? The cheap and cheerful index-tracker thrashed the hedge funds, leading Mr Seides to concede defeat early.