Active versus Passive Management

 

Trustees may well have a preference for active or passive portfolio management drawing on their own experience, knowledge, risk appetite and philosophies.

 

We only recommend active management where there is evidence that managers can add value whilst not taking excessive risk. By evidence, we mean independent research which shows that on average most managers consistently outperform the benchmark.

 

Standard and Poors' research found "At least 69% of active International Equity Funds underperformed relative to benchmark over every time horizon". (S&P Indices Research and Design 2011)

 

While indeed some active managers do add value and outperform the market, past performance is often not a good indicator of future performance. Further, studies show that the longer the charity invests the more likely it is that the investment returns will revert to the average for the asset class.

© 2019 Trust Investments Management Limited