With active and passive investing back in the spotlight, ASB’s head of asset management explains what investors should be considering beyond the headlines.
Active versus passive investing can sound like a contest. Passive funds generally cost less, while active managers try to beat the market. A table of recent returns can make it seem as though all you need to do is pick a winner.
Mat Young, ASB’s head of asset management, says that may not be the right place to start.
“I don't actually think it's a matter of being better,” he says. “I think it's a matter of using the right tools for your individual circumstances – and for many, it could be a mix of different strategies, rather than a black or white approach.”
Passive (or index) investing aims to match the performance of a market index such as the S&P 500, which tracks the performance of the 500 largest publicly traded companies in the US. Active investing, meanwhile, involves deliberate decisions about what to own, avoid or emphasise, often with the aim of beating a benchmark – a yardstick for measuring its performance. The research and judgement generally cost more.
Mat Young, ASB’s head of asset management
“Passive investing is owning a share of every horse in the race. Active investing could be a range of things like choosing the jockey, the horse, track conditions or the draw the horse is running. There are a range of choices which could influence the result,” Young says.
An index fund may hold every investment in an index, but the index itself could become more or less concentrated over time. An active manager can decide whether to keep that mix or change it, though the decision may help or hurt returns.
“As we always say, it is hard to beat the market,” says Young.
The labels can also mislead.
It’s not black and white – there are important active decisions made with what can look like a passive investment strategy, such as making strategic asset allocation decisions, currency hedging, choices about which index to follow, picking an underlying fund manager and risk management.
On the other hand, active managers aren’t necessarily trading shares all day. That perception that active investing equals picking the best stock no longer tells the whole truth.
“It’s more of a continuum than one or the other,” Young says.
A portfolio can follow the market in some areas and make deliberate choices in others. Someone building their own portfolio might use a low-cost, passive investment for broad exposure to global shares, then take a more active approach by choosing a few individual companies themselves.
Professional fund managers can also combine the two approaches.
Doing it yourself can be a way to learn, but it means conducting your own research, choosing what to buy, watching it and deciding when to make changes.
“You are making all the decisions and own the outcomes. Relying on professionals gives you access to their expertise and tools – much like fixing your car yourself vs a mechanic,” Young says.
In a managed fund, professionals make and review investment decisions, but the investor still has to choose a fund that suits them.
When it comes to fees, they reduce the amount that remains invested and the return they ultimately receive. A passive fund will generally charge less because there are fewer decisions and costs involved. With an active fund, investors also pay (in fees) for the research and decisions behind its investment choices. ASB KiwiSaver Scheme fees are at least 27% below the industry average*.
If an active fund aims to beat a benchmark, investors would want it to do so after fees, though it may not. Young acknowledges that people have become wary of paying higher fees, only to find their fund has underperformed.
A fund’s recent return is only part of the picture. What was it trying to achieve? How much did it charge? Is its benchmark relevant? Funds can hold different investments at different allocations and take different risks, even if they appear beside each other in a league table.
Young says investors need to consider the ride, as well as the result.
Two funds that are managed differently could both finish the year 10% up. One might rise steadily; the other could fall sharply in the first six months before recovering in the second half. The final return is the same, but holding them would feel very different.
ASB funds are designed for different goals and timeframes, with different potential investment returns and risks, from conservative to aggressive. BlackRock, one of the largest global investment managers, helps put that strategy into practice, including through decisions about the mix of investments in each fund.
Based on the latest Morningstar data to June 30, 2026, ASB’s funds have delivered strong results, with the majority of its diversified funds achieving top quartile for three-year rolling performance. ASB’s Growth fund also maintained strong 10-year performance, returning 9.3% per annum, ahead of the category average of 8.9%.
This consistent, risk-adjusted performance contributed to the ASB KiwiSaver Scheme being awarded Morningstar KiwiSaver Fund Manager of the Year 2026 and Canstar Outstanding Value KiwiSaver Scheme Award for 2026^.
Before weighing active against passive, investors need to know that it’s not always a case of one or the other.
Find out more about investing with ASB at asb.co.nz/invest
ASB Group Investments Limited is the issuer of the ASB KiwiSaver Scheme. The Scheme's product disclosure statement is on ASB's website. Past performance does not guarantee or indicate future performance. Returns may vary over a fund’s minimum investment timeframe and longer.
* Fees for each ASB KiwiSaver Scheme fund are at least 27% lower than the industry average (Sorted Smart Investor, 31 August 2026, based on a $30,000 balance).
^ Morningstar is a leading independent global investment research and ratings provider that assesses fund managers based on long-term performance, risk management and investment processes. Morningstar Awards 2026 © Morningstar, Inc. All Rights Reserved. ASB is awarded Fund Manager of the Year, KiwiSaver category, New Zealand. Canstar independently assesses providers on factors including investment performance, fees, features and customer experience, highlighting the overall value delivered to members.