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Grant Kennaway, general manager of research at Lonsec, has warned financial planners at an investor briefing not to get too caught up in the “excitement” of indexed funds as they are not a panacea for all investment solutions.
“The flavour of the month are things like index style products and exchange traded funds, and I was reading about ETFs [exchange traded funds] the other week and it was full of hyperbole about what this exciting new investment was in ETFs,” Kennaway said at a Tyndall Investment Management/T. Rowe Price investor briefing in Melbourne.
“But at the end of the day, ETF’s track the market up and down, it’s not a panacea for all investment solutions.”
While he believed ETFs played an important role, they would only work in concentrated, small asset classes such as Australian property or the fixed income market, Kennaway said.
“But in asset classes like equities … you should still be supporting active managers who’ve done a lot of work on their research, looking at how managers perform over the long term, and our strong view is that active managers in equities can outperform.”
