Choose and Choose: Active Management as an Investment Conviction


What are active and passive strategies?

Active managers are those who, through careful research and analysis, select the companies in which they invest. This is different from passive strategies, which seek to hedge the entire market by following a given index. One of the benefits of active management is that it allows fund managers to identify where they believe the market has mispriced a company and invest accordingly.

An active challenge

You don’t have to choose between active or passive management

Different strategies will have their own advantages and disadvantages.

However, in times when markets are turbulent or falling, a good active fund manager may be able to make choices to help generate a positive return in a negative market.

Frederic Taché, head of fixed income at St. James’s Place, notes, “Whenever you think about financial markets, the most important thing really is to avoid losing money. If you invest in liabilities, you are making the decision to be exposed to every crystallized loss appearing in the index you are trying to replicate. Whereas if you’re willing to pay for active management and you do your homework to make sure your manager is doing it thoroughly, and as it should be, that’s actually an effective way to reduce that risk as much as possible. .

Although we believe that active management has an important role to play in generating positive long-term returns, we use the full spectrum of investment strategies as we believe other strategies can support overall portfolio strategy or complement our active fund managers.

A good example is our Global Equity Fund, which we renewed last year. The fund has three strategies: two are actively managed and the third is a passive strategy tailored to SJP. This creates a diverse pool of investments, lowers costs and has the potential to outperform the market.

By focusing on active management, but combining different strategies across different asset classes within funds and portfolios, while using our scale to reduce fees, we believe we have the best chance of generating returns at long term and create good results for our clients.

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