FA Whitepapers


June 2016  

The hidden risks of going passive

Disaffection with underperforming fund managers can push investors towards ‘passive’ management of their assets. However, passive strategies can contain unwelcome biases and hidden concentration risks, while also increasing investors’ exposure to wider systemic risk.  We think it would be a mistake to believe that going passive is a low risk route to success, as many active managers can potentially outperform passive indices over the long term.  However, investors should be careful not to let high expenses and asset allocation miscues cancel out any excess return potential.

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