Having worked separately with both active and indexed investment strategies for many years, I can see the advantages and disadvantages to both active and passive approaches. We employ both active and passive products in our portfolio. We believe that many different investment approaches may work. We are not dogmatic. We apply the approach that gives us the best chance of success in a given environment. Consequently, we prefer active strategies in less efficient asset classes, where the likelihood and magnitude of alpha is higher; in relatively efficient markets, we favor more passive, low fee products. We may also favor active strategies that have certain desirable characteristics, such as structural, risk, or tax advantages, over its passive alternatives.
| Passive Products | Active Products | |
| Fees | low (we favor the lowest cost providers) | higher (we favor below average active expenses) |
| Probability of Success | high in efficient asset classes | higher in inefficient asset classes |
| Role | core (~80% of portfolio) | explore (~20% of portfolio) |
| Organization Size/ Economy of Scale | large firms (cost economies) | smaller/ niche firms (retain flexibility) |
| Manager Alignment | not required | manager stake essential |