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[ I N - D E P T H | A C T I V E V S . PA S S I V E ] A ctive investors are sensing that the long-term tide towards passive investing may be starting to turn. According to Morn- ingstar’s bi-annual Active/Passive Barometer published in March 2018, the success rate of stock-pickers in the US increased sharply in 2017: 43% of active managers outperformed their average passive peer, compared with just 26% of active managers in 2016. With U.S. interest rates starting to rise, could 2018 be the year when active strategy finally rebounds? The average passively managed dollar, according to Morningstar, still outperforms its active rival. Nicholas - SANTIAGO BRAJE, GLOBAL HEAD OF CREDIT TRADING, ING BANK Edwards, chief executive of Alterna- tive Asset Management in London, is convinced that the future is passive. Edwards argues that about 70% of all market activity now relies on algo- rithms, and says that this is impossible to compete with unless traders are at their desks 24/7 and have the ability to make decisions within milliseconds. Omnipresent algorithms, he asserts, will continue to reduce the scope for market arbitrage. “Automation drives pricing,” he says. “If people can move 40 // TheTrade // Summer 2018 quickly, they will.” Active investors, in Edwards’ view, are doomed to a shrinking minority in the future: “Most active manag- ers underperform and pension fund managers won’t take the risk.” A small pool of investors will continue