The “climate wars” pitting the two major political parties against each other has been one of the most debilitating features of the public policy debate in Australia over the past decade. It’s been a zero-sum game in which neither side can concede even a sliver of merit in their opponent’s position.
The endless passive versus active contest is the investment industry’s equivalent. It’s time to declare an end to the passive versus active wars.
Active and passive investing are complementary, not at logger-heads. They serve different purposes within portfolios.
We are passionate advocates for active investing. That, however, doesn’t mean that we turn up our noses at passive investing.
It does, though, mean that based on findings from decades of investment research, there is compelling evidence to support the proposition that markets go through periods of inefficiency where they vary from fundamental value. By doing so, they create opportunities for active investors to outperform benchmarks by intelligently exploiting desired risks and avoiding undesired ones.
With the Global Financial Crisis and subsequent quantitative easing era as live stress tests, we show that there is value in allocating dynamically across sub-asset classes and that active approaches offer the opportunity to outperform across key fixed income sub-classes.
Moreover, performance data shows that active management has been able to generate similar return outperformance either side of the GFC by utilising the full spectrum of investment tools across full market cycles.
Over the last quarter century, we have found that co-creating active fixed income solutions with clients makes the most of the full quiver of options active approaches bring.
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