"Now is the time for actively managed funds, as long as they are truly active," asserted Cremers. Among his reasons:
- For portfolios "stuffed with passive products," active management "provides critical diversification in this time of heightened volatility."
- "Avoid the noise." Rather than using the average performance of actively managed funds as a basis for comparison, "more-detailed distinctions among active funds" can lead to "insights with more statistical confidence."
- Active Share, the proportion of a fund’s holdings that differs from that fund’s benchmark, can help "distinguish between truly active funds and those closely matching their benchmark indexes."
- Active management may provide protection in volatile markets as indexed products "tend to be highly correlated with markets, and with each other."
"Truly active funds with high-conviction strategies help investors in the long run," concluded Cremers.
Touchstone Securities, Inc. has partnered with Professor Martijn Cremers to provide consulting services. Touchstone and Professor Cremers are independent of each other. There are no assurances that any strategy or investment approach will meet its objectives. This information should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.
Past performance is no guarantee of future results. Active Share is not a performance measurement. A high level of Active Share does not assure outperformance of a fund relative to its benchmark index.
Investing in an index is not possible. Investing involves risk, including the possible loss of principal and fluctuation of value. Please visit touchstoneinvestments.com for performance information current to the most recent month-end.
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