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CIP Quips

Passive Pride vs Active Vigilance

What's in the News...

Market volatility and the continued rise in interest rates have advisors sticking to allocations driven by active management. 83% of US based financial advisors said they believe the current market environment is likely favorable for active portfolio management, as published by Natixis Investment Management last week. Those who participated in the survey stated that they allocated only one third of client portfolios to passive strategies, while a larger percentage (roughly two thirds) was allocated to actively managed strategies.  

This past February ETF Fund flows entered the red for the first time in years, according to DataTrek Strategist Nicholas Colas; which shows investors are thinking about more than passive investments. Active management has not been kind to investors over the past several years, but those returns have been improving as of late. According to Citywire, “In 2017, 43% of active managers beat their benchmarks, up from 26% in 2016, according to the latest Morningstar active/passive barometer report. Year-to-date in 2018, 63% of mutual funds are beating their benchmarks, according to a BofA report”. Lastly, as shown in the graph below produced by PIMCO, the majority of active bond funds and ETFs beat their median passive peers after fees over the past 1, 3, 5, 7 and 10 years. It’s clear that active management in fixed income yields a better outcome, given the bond market’s unique structure. 

 

 

What are we thinking?

While both active and passive management can play a role in overall investment strategy, it is important to be especially vigilant in the fixed income sector. In recent years, active bond managers have more often than not outperformed their passive counterparts.

As bond managers focused on maximizing annual cash flows while preserving capital to provide future cash flows, our goal is to provide investors with a sustainable and substantial income stream. We believe the best approach, particularly in today’s uncertain environment, is an actively managed one. 



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages domestic equity, international equity, domestic fixed income, global fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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