When the first index fund came into existence, Starsky and Hutch, glam rock, flares and Chopper bikes were all the rage. Yes, the first index fund launched way back in the 1970s. And ever since then, the active/passive debate has continued to be an ongoing topic of discussion in investment circles. That debate continues to rage on today, albeit amid new market fundamentals and macroeconomic realities.

Passive vehicles have become increasingly popular in the UK over recent years, with the bull market of 2009-2015 providing fertile breeding ground for their growth and their low-cost appeal finding favour with advisers and investors alike in the post RDR-world.

Passives have also risen to prominence during a period in which active managers have struggled to outperform as their higher fees come under the microscope.

The passive camp certainly seems to be winning the debate in the media, with many a pundit proclaiming the end of active management as we know it. And the poor performance of some mutual funds, especially in the US, has provided further fodder for headline writers.

However, today’s volatile markets and economic uncertainties also present the ideal stage for the active sector to gain ascendancy on the seesaw of investment preference. And many UK advisers think the turmoil that has engulfed financial markets since the start of 2016 has swung the pendulum back toward the active sphere and taken the shine off passive investment.

Indeed the latest report by CoreData Research, which surveyed 429 UK advisers, reveals 77% of them will likely recommend or implement reduced exposure to ETFs and other passives amid the current volatility. Furthermore, the report finds that an overwhelming majority of 85% of advisers are more inclined to recommend active management during times of market turmoil.

So it would appear that recent concerns over slowing Chinese growth and the deepening commodity price rout have served to benefit the active camp — which traditionally flies high on a jet stream of volatility — in the eyes of advisers.

More broadly, this year’s survey also shows that a majority of advisers favour active over passive for a variety of investment objectives and strategies — including generating alpha, generating stable income and gaining exposure to non-correlated asset classes.

In a further blow to proponents of the passive strategy, the CoreData study reveals that a significant majority of advisers prefer active when it comes to accessing emerging markets. Emerging market equity, in particular, remains a comparatively inefficient asset class, providing opportunities for managers to add value through skilled stock selection.

And with 16% of advisers saying they are seeing declining demand for passive equity — double the percentage saying that demand for active equity is declining — passive investments seem to have a limited appeal.

But despite these findings suggesting that advisers still have a bias toward active management, the choice between active and passive is in reality a redundant one. The situation is not black and white and active and passive strategies are not mutually exclusive. Advisers should strive to use a harmonious blend of active and passive depending upon what sectors or themes they want to access and the point of the business cycle. And the CoreData survey finds that half of advisers agree that the best approach is to use a combination of active and passive.

Meanwhile, the emergence of hybrid products has served to blur the lines between active and passive and further complicate the debate. Vanguard, a pioneer of passive investing, recently launched a new range of “active” ETFs offering an active investment approach under the ETF umbrella as a type of third-way option. Another hybrid product, the recently launched New Advanced Passive offering from Tilney Bestinvest, further reflects the fading line between active and passive.

Such active/passive hybrids echo developments in the smart beta sphere – a sector that is gaining rapid market traction. While lacking a clear-cut definition, smart beta encompasses a strategy whereby a manager tracks an index focusing on specific opportunities and will look for market inefficiencies while also considering themes such as volatility.

But there is no doubting that passives continue to hold appeal for a large swathe of people. Passive investments clearly triumph when it comes to the cost arena, although hidden trading costs can make certain passive investments less cost-effective than they might appear.

Passives also benefit from their broad appeal. While a core component of robo-advice offerings targeting autonomous consumers, passives also play an important part in the adviser’s toolkit — whether accessed via individual funds or via multi-asset portfolios.

Their low cost appeal and use within robo-offerings also make passives an attractive proposition to mass market investors and in this context could help democratise financial services and bridge the advice gap created by RDR.

Both robo advice and passive investments answer investor calls for cheaper solutions during times when active managers struggle to outperform. And the phenomenon of closet tracking, where active funds merely hug their benchmark, has raised questions about the value of active management. The European Securities and Markets Authority recently called on national regulators to further examine the issue of closet tracking as it considers new definitions of active and passive to make clearer the differences to investors.

Nevertheless, it seems that large numbers of advisers still look to active strategies during periods of volatility and market stress. The debate currently being played out is perhaps a little too narrow in focus and could benefit from being more representative of all voices in the financial services industry. And if our research has helped shed a little light on the views held by some financial advisers then that can only be good.

But expect no end to the ongoing active/passive debate. Changing investment preferences, played out against a backdrop of shifting market and economic fundamentals, will ensure the discourse continues for some time yet. And like fashion and culture, investment trends have a habit of being cyclical. Let’s just hope that we do not return to the days of the first index fund when flares and glam rock were all the rage!