Is the claim that active management pays off during extreme volatility even true?


In May 2022, Franklin Templeton CEO Jenny Johnson made the claim that in times of great volatility active management “pays off.” Of course, this comment was made in the context of rising inflation and market volatility. Here is her full quote: “It’s no question, it’s a difficult time […] it’s times like these that you find value. I think the challenge is, there is a lot of mixed signals.”

As the writer of Ecclesiastes says - there is nothing new under the sun. These sort of claims regarding active managment and their ability to beat the market in times of volatility is nothing new—its been going for 25+ years. Investors fall prey to these claims all the time.

When I read predictions from CEOs, market prognosticators, active managers, etc.I am reminded of a study from the University of Waterloo. Academic Martin Harry Turpin and colleagues published a paper in April of 2021 called “Bullshit Ability as an Honest Signal of Intelligence.” Turpin writes, “The ability to produce satisfying bullshit may serve to assist individuals in negotiating their social world, both as an energetically efficient strategy for impressing others and as an honest signal of intelligence.”

Yes, these market beating claims sound impressive—like a real strategy. And when you listen to them they sound super smart and intelligent. The problems is that most of it is BS.

Check out the SPIVA Study below:


Read the BS Academic paper here.