Core Perspective: Unpacking passive investing

This is the first of a series of presentations which aims to 'Ask the right questions' about investing and the role passive plays in achieving better outcomes for investors and society. To date the focus has been on finding the optimal split between passive and active. However, these 'quantitative' approaches rarely look at the causes behind the shift to passive strategies and their broader implications. In this presentation we unpack the drivers behind the shift from traditional active - to passive and the resulting long term implications for the industry and society - for example, on price discovery and liquidity.

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Core Perspective: The Passive allocation dilemma

“This is the second part of a series of presentations which aims to “Ask the right questions” about investing and the role passive plays in achieving better outcomes for investors and society. To date the focus has been on finding the optimal split between passive and active. However, these “quantitative” approaches rarely look at the causes behind the shift to passive strategies and their broader implications. In this presentation we will look at the passive allocation dilemma facing fund selectors which arises from the “market is all active” research we covered in the first presentation. We unpack some of the risks associated with intermediation and give an example how one could overcome these by using an appropriate financial planning framework.”

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Core Chartbook 2021 key take-outs

Rules-based funds continue to grow at the expense of active across most markets, a reflection of investor preferences and the pressures on fees and costs in the industry. This is clear in the findings of the Nedgroup Investments annual Core Chart book which illustrates the state of the entire rules-based industry in a series of interesting charts and data points.

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Nedgroup Investments Core Range

The Nedgroup Investments Core Guarded Fund has the best chance of success in the Multi-Asset Low Equity category. Funds in this category are typically suited to investment periods of about 3 years because they have smaller ups and downs compared to traditional balanced funds used for pension savings. The Nedgroup Investments Core Guarded Fund has lower overall costs and fees, which means you don’t need to look for additional returns just to overcome the fee hurdle.

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