The active passive debate continues ...
In what looks now like an exquisite piece of market timing, the Financial Markets Authority (FMA) "active v passive" debate on February 19 this year coincided nearly exactly with the historical peak of the NZX50.
The following day the benchmark NZ share index topped 12,000 for the first time – a height it sustained for just one more trading session before tumbling, slowly at first and then in rapid freefall, to the rock-bottom of about 8,500 on March 23.
Investors used to the generally placid conditions of post-GFC markets would be in for the shock of their lives. The March volatility, triggered by the coronavirus economic lockdown, marked a new extreme even for experienced professional fund managers. NZX share prices came unhinged during the 30% descent from peak to trough.
In theory, times of heightened volatility throw up more opportunities for active managers as quality stocks often hit bargain basement prices. However, it is not as simple as just buying everything that appears cheap – especially with so many unknowns still around Covid-19.
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