Active investing back in vogue among retirement advisers, survey shows
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ACTIVE INVESTING BACK IN VOGUE AMONG RETIREMENT ADVISERS, SURVEY SHOWS
Active investing, long shunned by risk-averse investors as a costly way of managing their money, is gradually making a comeback.
Nearly 55% of retirement plan advisers believe active managers can consistently outperform the market, according to a survey from BlackRock BLK.N released on Tuesday.
The debate on active investing has been a familiar one on Wall Street, having previously emerged in the aftermath of the 2008 global financial crisis, which weakened a long-held belief that dynamic management could shield investors from turmoil.
It also boosted the appeal of portfolio diversification and index investing because clients lost faith in the ability of professional fund managers, almost all of whom had failed to predict the crisis.
In the decade that followed, interest rates were low and yields from the S&P 500 .SPX index were elevated, ushering in an era of "set it and forget it.”
That changed after 2022, when the Federal Reserve began the fastest monetary tightening in four decades.
Investors must actively add value and bulletproof their portfolios from risk because "simply owning the market won’t get it done anymore," asset management giant Blackstone BX.N said in a report in November 2023.
Still, costs continue to be a factor. Nearly 71% of retirement plan advisers said cost-effectiveness was the most important factor when choosing their investment vehicles, the BlackRock survey showed.
Active investment strategies are usually costlier than their passive counterparts.
The survey illustrates the efforts advisers are making to boost their clients' retirement income, at a time when higher costs of living and confusion over how much to save has shattered confidence and fueled worries about outliving savings.
Some have called to increase the age of retirement to ease the burden on Social Security, which may struggle to meet its full obligations when younger workers retire.
Such a move could be controversial, however. A similar reform in France last year, which raised the age of retirement to 64 from 62, led to several protests.
The United States has gradually increased the Full Retirement Age - the point when individuals can claim Social Security and receive 100% of the benefits they have earned - to 67 from 65.
But retirees can start claiming retirement benefits as early as age 62.
(Niket Nishant)
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