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Active/passive split is a moot point for Fidelity

Fidelity’s investment solutions group, which manages the firm’s multi-asset and multi-manager funds, has reignited the active versus passive debate in its latest strategy note, Clockwise.

Rather than supporting one strategy or the other, investment director Steven Edgley says both are important in portfolio construction and the boundary between them is not always clear.

Edgley sees long-term strategic asset allocation as an active investment decision in itself, which can add value. Even if asset allocation decisions are played out only through passive investments, there is still an active element to the end portfolio.

Many active managers fail to outperform their benchmarks after charges but Edgley believes those that produce just 1 or 2 per cent over a benchmark can make a big difference to returns.

But passive investments can be useful where the chances of producing above-market returns are at their lowest, such as where markets are efficient. Passive strategies may also be preferred for short-term tactical positions where the time horizon is too short for active managers to produce decent returns.

Edgley points out that the costs of passive investment are often overlooked, not only in terms of direct charges but also the lost opportunity for above-market returns. In his view, active tactical asset allocation can protect against market declines and periods of extreme panic better than a passive strategy that cannot react to changing market conditions.

He says: “Active management should be used where and when it has the best chance of success and passive strategies used to round out the asset allocation where appropriate.”


Lloyds of London prepares for eurozone collapse

Lloyds of London says it is prepared for a collapse in the eurozone and is reducing exposure to the continent “as much as possible”. The Sunday Telegraph reports Lloyds chief executive Richard Ward said the London market had put a contingency plan in place to switch underwriting to a multi-currency settlement if Greece leaves the […]


SRA to launch consultation on IFA referrals

The Solicitors Regulation Authority is consulting on whether to change its requirement for solicitors to refer clients to independent financial advisers for investment advice. The SRA plans to launch the 12-week consultation following its board meeting on July 4. Currently, the SRA’s code of conduct states solicitors can only refer clients who need investment advice […]

MAM fund opts for long volatility ETF

MAM Funds’ Midas balanced growth fund has recently used a long volatility exchange traded fund as an alternative to a short Eurostoxx ETF. Fund manager Simon Callow says he wanted to partially short UK and US exposure because of concerns about equity markets. Callow says the CitiGroup US Economic Surprise index, which he views as […]

Self-build lacks lenders

Brokers feel the Government’s drive to increase the number of people building their own home will fall short due to lenders’ apprehension about this type of lending. Earlier this month, housing minister Grant Shapps urged lenders to offer more self-build deals after pledging £30m to provide short-term finance to help fund projects where groups of […]

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Considerations for overseas workers in Germany

With Germany’s strong economic growth leading the eurozone’s recovery, many UK businesses are keen to be part of the success story: recent data shows that there are currently more than 280,000* employees working for a UK-controlled company in the country.


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