Are tracker funds and ETFs a serious threat to active management?

THE BIG QUESTION

We ask industry figures.... Are low-cost tracker funds and ETFs a serious long-term threat to active management?

Nick Blake, head of retail sales at Vanguard Yes - a major threat. First, because high-cost active management is poor value for money, and second, because of clear evidence showing that investors choose low-cost funds in a fee-based advice environment. On average, active managers in the major markets fail to beat their benchmark over the long term. In the UK, investment decisions have traditionally centred on past performance. In contrast, the advice in fee-based, rebate-free environments tends to focus on financial planning and asset allocation based on a client's risk budget and time ...