For Investors

Learning Center:
Active Management and the Individual Investor

Active or Passive? | ESG Investing | Investing and COVID-19

Active or Passive? The Majority of Professional Investors Say "Both."

 

Whether you are a financial advisor or an individual investor, when developing a long-term investment plan, it’s critical to incorporate a mix of active and passive vehicles in your portfolio. Why? Simply because certain investment outcomes are best met by using active management while others cannot be achieved through passive investing alone.

Index funds work well when combined with active management, and vice versa. Active management enables investors to navigate complexity, customize portfolios, better manage risk, capitalize on specific skills or profit from market inefficiencies. Passive management helps to reduce costs, especially in more efficient market segments.

There’s broad agreement among professionals that most investors benefit from a combination of active and passive. According to Cerulli, 75% of financial advisers agree that active and passive complement each other.  A recent Blackrock survey found that institutional investors do not see active/passive as an either-or choice, and two-thirds seek the right combination of active and index equity strategies to meet their investment outcomes.

Active management offers numerous benefits from customization to tax management to an ability to seize on market dislocations. For example, during the October-December sell-off in late 2018, the number of funds beating their benchmarks rose “sharply” demonstrating that managers have an ability to respond quickly to changing market conditions.

Many institutional investors prefer active management for providing exposure to non-correlated asset classes (74%), accessing emerging market opportunities (75%), generating stable income (58%), and implementing environmental, social and governance (ESG) strategies (68%).


A Balanced Narrative – It’s not active management versus passive management. A more accurate, balanced narrative is active and passive working together, as these academic and industry experts explain.


Focus on Outcomes First – Former J.P. Morgan Asset Management Portfolio Manager Anne Lester says the question is not active or passive, but the mix that will empower the investor to achieve their financial goals.


Know What You Own – Many investors think investing in an index fund gives them diversity and low risk. Michael Cross of SouthernSun Asset Management says that misconception can cost them money in the long run.

asian-man-275.jpg
Why Active AND Passive?

BENEFITS OF ACTIVE MANAGEMENT

√  Opportunity to outperform the market

√ Customization

√  Tax Management

√  Seize on Volatility

√  Generate Stable Income

√  Exposure to Non-correlated Asset Classes

√  Manage Risk

√  Integrate ESG Factors

BENEFITS OF PASSIVE MANAGEMENT

√  Low Cost

√  Market Returns

√  Transparent

√  Tax Efficient

Sustainable Investing

Whether it’s called Sustainable Investing, Socially Responsible Investing or ESG (Environmental, Social and Governance) Investing, the ability to invest in line with one’s values has emerged as one of the most significant investment trends in recent years. Sustainable investing has already attracted record inflows during the pandemic, pushing assets under management over $1 trillion globally, according to the Financial Times.

Here you’ll find expert insights and educational content from the Council and its members to help you better understand the world of responsible investing.  

 

Investing During Times of Crisis

As the COVID-19 crisis gripped the country and the markets swung wildly, many concerned investors likely revisited their investment approach and began searching for answers to common questions: Should I stay invested in the markets? What funds should I use? Should I allocate more to equities for fixed income? What is my risk tolerance?

Investors should seek the advice of a professional financial advisor to answer these questions, but it’s also a good idea for investors to familiarize themselves with key investing concepts and insights from top investment managers. That’s where Active Managers Council can help.