Furthermore, the human element has just been moved downstream from the fund manager to the individual investor or advisor. The decision to shift holdings or asset allocation will be primarily driven by the analytical capabilities and emotional fortitude of those who are using these tools.

Some believe that active funds will eventually cease to exist altogether. If your only experience in the market is the last ten years, it’s hard to believe that active managers will survive. However, it’s worth pointing out that there are areas where investors still perceive big advantages in the expertise of active management.

Particularly in fixed-income and alternative strategies. There is a reason they still proclaim investors like Bill Gross or Jeffrey Gundlach the “Bond King”.

The media likes to paint a stark distinction between active and passive management like it’s a black and white test. The reality is far more nuanced as passive vehicles are used by active participants in the global marketplace.

The blending of these philosophies is where portfolio management takes place in the real world and I expect that to only expand in the years to come.

This article was republished with permission from FMD Captial.

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