Active vs. Passive Investing
R-I-S-K. In the world of investments, it’s the four-letter word we each try to minimize. Active fixed income management has the ability to reduce and/or eliminate much of the risks that often unknowingly plague passive investors.
Yet investors have piled into passive fixed income portfolios since the global financial crisis of 2008. As of December 31, 2016, the percentage of net assets in all U.S. passive taxable bond funds was 27%, according to Morningstar. By contrast, passive taxable bond funds comprised only about 11% of the total U.S. fixed income taxable universe ten years earlier.
In 2016 alone, investors put $147.8 billion into passively managed taxable bond funds and $46.3 billion into actively managed taxable bond funds, according to Morningstar.
While passive investing has its potential positives—low fees, transparency, tax efficiency, and indexing—the strategy carries its own risks.
In this white paper we examine five reasons why investors should consider allocations to broad- based, actively managed fixed income strategies.
Emerging Market Debt
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