New research conducted by Russell Consulting suggests active and passive investment strategies are not necessarily mutually exclusive.
Russell’s senior consultant in Australia Nick Curtin said the decision between an active or passive approach would vary from one investor to the next.
“Most importantly, our research shows investors can use both strategies together so long as they carefully assess the merits of each on a case-by-case basis,” Curtin said.
Discussing the merits of active versus passive investment in a research paper, Curtin said that although there was little expectation of a difference in the average performance of active versus passive approaches where markets were efficient, there were some instances where investors wanted to choose active over passive management.
He said such examples included inefficiently constructed commodities futures, or a commodities futures sector where there was no universally accepted index.
Curtin also suggested it was too soon to tell whether it would be possible to passively replicate after-tax indices efficiently.
