Active Asset Allocation – the answer to Active v Passive investment debate?

The debate around the merits of active v passive investing was re-ignited by the regulator’s reports on its Asset Management Market Study (AMMS). But our Asset Allocation Director, Gavin Stewart, believes it has brought to the forefront the importance of a well governed asset allocation approach.

The Financial Conduct Authority’s (FCA’s) reports on its study of the asset management market had relatively little to say about asset allocation. Not directly, anyway.

Among the more noteworthy issues raised in relation to advisers were:

  • how paying more in charges for active management didn’t always correlate to better outcomes for the customer; and
  • how advice costs are claimed to be one of the largest portions of the asset management value chain.

But while asset allocation was referenced largely in relation to investment consultants, the regulator’s study re-opened the debate over the merits of active and passive investment management. At Scottish Widows we believe this debate is too narrow. We believe the question should not be whether you take an active or a passive approach, but why you wouldn’t take the best features of each?

This is where asset allocation comes in. Because we believe effective asset allocation means that it is possible to provide investors with the best of both worlds, by combining active allocation decisions with elements of passive or quantitative underlying management.

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Are investors getting their money's worth? A disciplined approach to asset allocation
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PLEASE REMEMBER PAST PERFORMANCE IS NOT AN INDICATOR FOR FUTURE RESULTS. INVESTMENT MARKETS AND CONDITIONS CAN CHANGE RAPIDLY AND, AS SUCH, ANY VIEWS EXPRESSED SHOULD NOT BE TAKEN AS STATEMENT OF FACT, NOR SHOULD RELIANCE BE PLACED ON THESE VIEWS WHEN MAKING INVESTMENT DECISIONS.

(i) JSTOR: Determinants of portfolio performance

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