Ash Williams: Passive Investing’s Use Is an ‘Illusion’ That’s Now Dispelled

It’s a creature of another time, and active management is needed for today’s challenges, the investment legend argues.


Today’s complex markets, coming off a rare simultaneous bear run for both stocks and bonds in 2022, need a good dose of active management, according to Ash Williams, retired CIO of Florida’s State Board of Administration and now an adviser and vice chair at J.P. Morgan Asset Management.

“Very simply, the less efficient markets are, the more likely one is to be rewarded for active management,” he told Jared Gross, the firm’s head of institutional portfolio strategy, in an interview published in a company newsletter.

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Active management is useful nowadays for a whole gamut of assets, both mainstream and not, Williams said. This ranges, he explained, from “the least transparent, liquid and efficient—think frontier equities or frontier sovereign debt, where active management is nearly mandatory—to the most liquid developed market securities; think U.S. large cap equities, where it is less so.”

An “illusion” was created after the global financial crisis of 2008 and 2009, Williams explained, “that passive is the way to go.” This notion, he said, is a very “naive presumption.” The post-crisis climate was “an unprecedented period in which increasing globalization, disinflation and accommodative policy created a rising tide lifting all boats. That tide has now turned.”

These days, with deglobalization, high inflation and a Federal Reserve bent on hiking interest rates, yesteryear’s broad market gains and the passive investing that rides on them are gone, Williams insisted.

One area thriving at the moment is core bonds—Treasuries, investment-grade corporates and a whole panoply of others, such as mortgage-backed securities—where, he said, active management “can enhance returns and reduce risk across time.”

Another promising area, in Williams’ view: offshore markets, which are cheap, thanks to the strong dollar. “I think that parts of Asia, and China in particular, may be good opportunities,” he stated.

Moreover, Williams suggested, “Closer to home, there should be opportunities within tech, which has been seriously beaten down, as well as within health care.” What’s needed with stocks in these sectors, though, is a canny active manager, he noted, one who is “adept at navigating the equity opportunity set—and not simply chasing the momentum trades.”


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