This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
ETFs, passive trackers, index funds: these are all names which have become increasingly more common in investors’ vocabularies. Today, passively managed funds are the dominant owners of US equities, having surpassed actively managed strategies. There are clear attractions to passive investing, such as low cost, diversification, easy access and availability. An additional reason investors may be tempted by passives in the current environment is their lack of a style bias. We have experienced a period in which style – i.e. growth and value exposures – has dominated relative returns, but this period may be ending. At least we can all agree that the outlook is highly uncertain, and passives may be seen as a way to duck a hard choice and avoid getting it wrong. However, we believe there are a number of attractive active investments in the investment trust space which could be better alternatives to going passive. These trusts offer core market exposure without a pronounced style bias, but have demonstrated the potential to add alpha to market returns. In this article we highlight five investment trusts – one for each major region – which offer investors genuine alternatives to taking passive exposure at a time when the economic and market dynamics which have benefitted passives may be reversing.
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