Asset manager claims investors lose out on underperforming active funds

According to research from multi-asset manager Charles Stanley Pan Asset, institutional investors are losing millions of pounds through underperforming active funds. It found that passive funds in 14 liquid asset classes outperformed institutional active funds by 4.73% on average over the last five years. It attributed this to poor decision-making and higher fees at active funds. For a £500 million pension fund, it calculated the performance differential was worth £3.8 million a year.

Charles Stanley Pan Asset head of institutional business, Bob Campion, said: “Our latest research provides further support for the argument that passive funds tend to outperform their active counterparts, net of fees, particularly over longer time periods. By taking a passive approach to investing in all asset classes, pension funds simplify their investment process, cut costs and should find long-term performance improves.”

Charles Stanley Pan Asset has estimated that the Local Government Pension Scheme could improve performance by £441 million a year by switching £85 billion from active to passive strategies.