For investors, the decision to allocate to active or passive funds is critical in the context of broad portfolio construction considerations. It’s not an easy choice to make but financial research has proven that, ultimately, allocating efficiently between the two is crucial for portfolio performance.
Current widely used approaches in the market to select between those management styles suggest that active managers cannot outperform over long periods of time. As a result, investors often adopt a dogmatic view on the topic. However, those approaches are based on methodological simplifications and errors that fail to arrive at a fair performance comparison between active and passive funds.
How can investors build optimal portfolios in that context? It is time to move away from broad-brush statements and use a new methodology to arrive at a fair view and build optimal portfolios.
In this paper, we will discuss in detail the issues surrounding existing relative performance comparison calculations, explain the solutions that are needed to correct and improve the process, and demonstrate the contribution of this innovative approach and the need to use it to build optimal portfolios. Click on here to access the whole analysis
Marlene Hassine Konqui