Active or passive: Alfred Slager (Vrije Universiteit Amsterdam)
This article was originally written in Dutch. This is an English translation
By Alfred Slager, Professor of Institutional Investment, Vrije Universiteit Amsterdam
To what extent can passive strategies adequately respond to sustainability and social impact?
‘Wouldn't it be better to ask how passive strategies should respond to this? It is positive that passive strategies not only look at the most important financial characteristics, but also increasingly at how companies deal with sustainability developments. At the same time, more and more criteria are being incorporated into the composition of indices. Such an index now has to be at home in all markets. In doing so, we may be asking too much of passive strategies. The more complex the index, the greater the chance of unexpected consequences. If social impact is the goal, private investments are often a better fit. In that domain, the discussion between active and passive is also less relevant.
The more complex the index, the greater the chance of unexpected consequences.
Does the WTP influence the choice between active and passive investing?
‘I don't have a strong opinion on that. I would find it remarkable if pension boards suddenly saw all kinds of new active investment opportunities that weren't there before because of the WTP. The question then is why those opportunities weren't exploited before. Simply pointing to the VEV restriction seems to me to be a somewhat limited answer. Conversely, pension funds that are going to invest more passively as a result of the WTP are not doing so because they have suddenly come to the conclusion that active investing is not right for them. Rather, it is because they want to devote more time and attention to IT systems, communication or other matters following the introduction of the WTP. By investing more passively, they create space in their “governance budget” to focus on these areas.
