According to new research, investors trust actively managed portfolios more than they do passive ones. Global investment firm T. Rowe Price offers investors options in actively managed ETFs to accommodate a variety of investment goals.
Research firm Quilter Investors found that 54% of investors would have confidence in their portfolio if it was run by professionals, as opposed to 8% who weren’t comfortable with a computer managed portfolio, reported FTAdviser. The preference also persisted when factoring in account costs. Passive funds are often cheaper than their active rivals.
“We are at a point in markets where we feel active management should thrive. Inflation and interest rate concerns are hampering bond yields, while we appear to be undergoing somewhat of a rotation in performance drivers for markets,” said Danny Knight, head of investment directors at Quilter Investors.
“As a result, actively managed portfolios have a great opportunity to add real value to clients by offering flexibility and being able to capture style changes as they happen," he explained.
The research was carried out recently, between May 27 and June 1 and surveyed 1,041 investors with a minimum of $83.5K (£60,000) in assets.
While there are still a fair number of passive options that perform well for investors, the shift to active management has come as little surprise to Ben Yearsley, investment consultant at Fairview Investing.
“I have been saying for a while that it could be a good period for active as investors require more differentiation now,” he said.
He also does not feel that passive indexing strategies can capture the shift to ESG investments as capably. “Passive and trackers aren’t dealing with ESG considerations well – you can’t really when mimicking an index whereas active funds are embedding ESG considerations into their processes.”
74% of respondents in the survey reported that diversification across a variety of asset classes was either fairly or very important to them. Furthermore, 41% reported that knowing their investments were well diversified would provide the greatest peace of mind in their investing.
“Diversification has proven to be of huge benefit to clients not just from a return and risk perspective but also the journey they go on to get there. For a lot of retail investors, it is often about the ride as much as it is the destination,” said Knight.
Investment firm T. Rowe Price offers a suite of actively managed ETFs; from capturing dividends with the T. Rowe Price Dividend Growth ETF (TDVG), to investing in growth stocks with the T. Rowe Price Growth Stock ETF (TGRW) and everything in between. T. Rowe Price has been in the investing business for over 80 years; through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying 22 years of experience on average.
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