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Rating:Active or Passive? Why Not Both? Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, March 17, 2014

Active or Passive? Why Not Both?

News summary by MFWire's editors

Buy active managed. No, just buy indexed.

Are you sick of the Harvard vs. Princeton histrionics yet?

Well, one noted Barron's columnist is offering the very cosmopolitan option of living with both. Can investors own the active funds and passive funds at the same time? The answer, for sure, is positive, according to WSJ's Michael A. Pollock. He illustrates five major tactics by which investors can enjoy the fusion of active and passive funds.

Imagine, a world free of the Passive versus Active cold war. Sounds almost impossible, perhaps visions of flotillas flying over the skyscrapers or demons tobogganing in snow-drizzled heck.

Well, if we are going to indulge in such a fantasy world, let's imagine what wholesalers would be like in this undiscovered country. For one, there might be wholesalers and firms crazy enough to offer ETFs that might compliment active funds, maybe even those of competitors, and vice versus. There might be sharing of information between different fund players in order to generate more sales for all.

But wait, that would be having one's cake and eating it too. As Pollock comments in his article: "Holding a mix of index and active funds is a way to get the advantages of index funds along with the satisfaction and potentially the financial upside of active management."

Under such circumstances, the potential market for selling a portfolio that combines two approaches is emerging. Yet instead of solely criticizing active funds to promote ETFs, how would fund firms work together brand and sell complimentary products? For the big-name asset managers such as Pimco, Eaton Vance, Vanguard, who have been either launching actively managed ETFs or planning to build the mixture, the portfolio-holdings transparency "has been the biggest hurdle," as Vanguard ETF strategist Joel Dickson told Barron's.

Perhaps, in this totally insane and imaginary fund world, wholesalers and firms would act more like the portfolio specialists that look at all of the whle universe of products and sell "solutions" to clients.

Having portfolio specialists sell to clients? That sounds crazy, like that crazy thing BlackRock is doing hiring, training and sending hordes of portfolio specialists to their clients. Or what AllianceBernstein or even Hancock is trying.

Trillions of dollars in AUM crazy. 

Edited by: Amy Xie


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