We think the alternative to benchmark-oriented investing is active value management that's oriented to absolute - not relative - returns.
Passive investments will play a role in some portfolios, but investors should also have the flexibility to take advantage of markets as they evolve and have the ability to protect their capital from permanent impairments through the use of managers who are both patient and discriminating.
Investor capital continues to pour out of active vehicles and into passive ones. Investors evidently believe that passive funds are attractive because their fees have been low and their returns have been good. In our view, this is an overly simplistic way to think about today’s market environment. Whether in equities or in fixed income, passive strategies attempt to replicate the broader returns of the markets. If the broader markets themselves are priced for low returns, investors who choose passive vehicles face the prospect of singularly disappointing returns over the long term.
Investors in the First Eagle Global Fund have generally stayed invested substantially longer than the average mutual fund investor. We think downside protection is one of the reasons.
The United Kingdom’s vote to leave the European Union has already led to significant turbulence in global currency and securities markets. Beyond this immediate reaction, we believe that political and economic uncertainty could continue for several years as the UK negotiates its new relationship with the EU.