Looking to blend active and passive investment strategies? There are four key factors you need to know about, explains Ankul Daga, senior investment strategist with Vanguard Europe.
Discussing the merits of active and passive investing with financial advisers, I am often surprised to discover how many are blending active and passive funds in their portfolios.
Why the surprise? I think it is due to the polarising articles we see in the financial media. But I find very little of this polarisation in advisers’ real-world decision-making. Advisers put tremendous thought into picking active funds and blending them with the market exposure they get through low-cost (and “boring”) passive funds.
Advisers consider a range of criteria when selecting an actively managed fund. The fund manager’s style, team, tenure and track record; the credibility of the fund house; the risk controls in place; and the access costs, just to name a few. It reflects real care to deliver value to the end client.
Yet, still, many advisers tell me they still struggle to choose the “right” active managers. Over-analysis leads to paralysis.
In new research, we explore a fund selection framework that can help advisers find the right balance between active and passive. In our view, the right combination depends on four key factors: alpha, cost, risk and patience.
Read more here about the active/passive framework, as well as upcoming events, workshops and materials.
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