Alger: Does active management make sense?

Alger: Does active management make sense?

28 december 2021

ETF's
Algemeen (02)

Some investors favor passive equity investing where diversification and low turnover are prime features. But as the next technological revolution unfolds and causes wealth creation to become concentrated in fewer holdings, does active management make more sense? Alger, a La Française partner firm, elaborates on this question.

Over their lifetimes, the majority of U.S. common stocks have destroyed shareholder wealth, according to academic research. However, Alger believes that the overall U.S. stock market in aggregate increased shareholder wealth, which illustrates that wealth creation is concentrated among select common stock.

The concentration of wealth creation has intensified. From 1926 to 1995, 0.50% of public companies accounted for a quarter of wealth creation, but since 1995, just 0.29% of firms have done so, Alger argues.

According to Alger, not all equities are good investments, which in Alger's view underscores the importance of skilled active managers who can seek companies with strong long-term fundamentals.

Alger graph 28122021

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