Combining active, passive, and strategic beta investing whitepaper

For financial professional use only

Investors today have plenty of options to consider when it comes to building their portfolios, but the proliferation of options can lead to chronic indecision. Unsurprisingly, the increased availability of different investment types, particularly the explosion of exchange-traded fund (ETF) offerings and the evolution of hybrid strategies such as strategic beta, has raised important questions over how investors should develop an asset allocation plan. Against this backdrop of complex choice, we sought to provide a new starting point for asset allocation decisions. In our study, we began by assessing how reasonable it is to maintain allocations to actively managed products, particularly as fee pressures and volatility concerns carry high significance for long-term investors. As a result of our analysis, we affirmed that there are important and complementary roles to be played in most portfolios by actively managed mutual funds, market-cap-weighted passive index products, and the newer but rapidly growing category of strategic beta ETFs.