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In recent years, there has been a growing shift towards passive investing at the expense of active management. Passive funds have outperformed active funds and achieved this within a lower fee structure. This creates a compelling proposition that has been difficult for investors to resist. Should we accept that active management is dead, and passive is the future? Alternatively, is there evidence to suggest that active versus passive is cyclical and highly influenced by the macro environment?

One only has to look at last year to understand why US interest rates or ‘the risk-free rate’* (*I prefer the phrase ‘lowest risk investment’ because US Treasuries are not without risk, a view shared by the ratings agencies) matters: the more investors can earn on dollar cash, the less they are willing to pay for all other investments.

A few weeks ago, during the Christmas period, I treated myself to the ideal night in. I was sat on my comfy sofa, blanket on my legs, my girlfriend by my side, hot chocolate in one hand, and TV remote in the other. The lights from the Christmas tree were too bright to enjoy a proper televised experience, but that didn’t bother me. What did bother me was the exhausting job of selecting a movie to watch on Netflix, especially for a rom-com junkie like me who’s probably seen 99% of the platform’s genre.

Following a bruising year for investors in 2022, markets opened 2023 in much better spirits. Nearly all the major asset classes enjoyed strong returns, with global equities up over 7% in dollar terms in January, global bonds by close to 3%, corporate and emerging market bonds outperforming governments, and gold up almost 6%. Commodities were generally more subdued, with the oil price declining by 2%, taking it 7% lower than a year earlier, a dramatic turnaround from its steep rise in the early months of 2022.

Artificial Intelligence, otherwise known as AI, is becoming ever more prominent in our day-to-day lives, both personally and at work. The market size of AI is gaining momentum. According to Precedence Research, the global AI market size was estimated at USD 119.78bn in 2022 and it is expected to be USD 1,597.1bn by 2030, with a forecast Compound Annual Growth Rate (CAGR) of 38.1% from 2022 to 20301. So, what’s driving this growth?