Hope springs eternal and the financial media and the Wall Street marketing machine always seem to come up with reasons why there are reasons to choose and actively managed mutual fund.
Furthermore if the author is looking to advisors as ts hose advocating active management one must ask the question "what exactly is the advisor doing ?". Ihe is simply running though past performance of active managers and choosing a portfolio made up of them ? If so he is using a methodology that has little if any chance of producing similar returns in the future. On the other hand a portfolio consisting of a mix of carefully selected ETFs can create a well diversified trasparent portfolio and in fact deal far better with some of the issues raised below than simply choosing a group of actively managed funds
Text from the article is in italics my comments in bold
Furthermore an advisor can easily make use of the vast number of ETFs to allocate a portfolio not only between developed and emerging markets but to specific companies or regions...and even hedge out currency risk. I have written previously of the case for overweighing Asian Emerging markets vs other countries in the emerging market category and of hedging the risk of a weaker Euro through currency hedged ETFs. Not only is this easily done it can be done in a fully transparent manner..unlike an active manager whose holdings are not available in real time.
If this article shows anything about use of actively managed funds it is how weak the case for using them is Either by choosing a small number of broad assset class funds or using a mix of ETFs to target particular sectors of the bond and global equity markets the case for using the ETFs and passing on the actively managed funds is a very strong one.