Janus Henderson Investors' Nick Watson has lamented the paucity of active fund managers able to beat the US stockmarket, as he urged the industry to "take more risk" in order to remain relevant in the face of pressure from cheaper, passive rivals.
Active fund managers have fallen behind passive offerings over the past decade, with the chorus of passive advocates, which includes the like of Warren Buffett, increasingly vocal.
A continued outperformance of the big tech names that dominate most global benchmarks has served to leave most stockpickers in the dust in recent years, with the Covid-19 pandemic only serving to exacerbate that trend, rather than, as many had hoped, giving active management the chance to prove its mettle.
"This should be an environment that should be good for active management," Watson, a portfolio manager within Janus Henderson's multi-asset team, told Investment Week.
"Unfortunately, once again, active management has not come to the fore."
There are some extenuating circumstances for this underperformance, Watson claimed.
Firstly, the dominance of the large tech names like the FAANGs has meant that "if you do not have in-line or overweight exposure to those massive companies, you are going to lag".
Secondly, Watson noted that "correlations in all of the world's major equity markets have risen dramatically".
"In that environment, it is very hard for active managers to truly offer something that is different without dramatically underperforming," Watson said.
"That is something that worries us; it is not a particularly healthy market environment.
"In a normal market, stocks, sectors and styles are less correlated, so from an asset allocation perspective, you can pick up different exposures to different risks and build a pretty coherent portfolio.
"But at the moment, the market is just focused on one unified and supported dynamic, which is central bank liquidity. That is an environment where I do think active management continues to struggle."