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Best of both worlds: Blending active and passive

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.

Article disclaimer

Important information:

This information is directed at professional investors and should not be distributed to, or relied upon by, retail investors. It is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.

This article is designed for use by, and is directed only at, persons resident in the UK.

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The opinions expressed in this article are those of individual author and may not be representative of Vanguard Asset Management, Limited.

Issued by Vanguard Asset Management, Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.




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