Destiny adds an Index Fund to its Investment Portfolios
25 Apr 2012
Active vs Passive Asset Management: Destiny Adds an Index Fund to its Investment Portfolios
GIB is proud to be blending innovative thinking with traditional investment values by combining a low cost Index Tracking Fund with existing Active Asset Managers in the Destiny Portfolios. This will allow for the following:
- Reduction in costs.
- Reduction in overall portfolio risk.
- Improved performance predictability.
- Achieving the same active risk target more efficiently.
- Increase the potential for outperformance.
The majority of the equity assets will continue to be invested with Allan Gray, Coronation and Foord but the inclusion of the Dibanisa SWIX Top 40 will nevertheless comprise around 20% of the equity assets.
What is Active Management?
Active management might best be described as an attempt to apply human intelligence to find "good deals" in the financial markets. It is the predominant model for investment strategy today. Active managers simply try to pick attractive assets and time when to move into or out of markets or market sectors. Their objective is to make a profit, and often, without intention, to do better than they would have done if they simply accepted average market returns. In pursuing their objectives, active managers search out information they believe to be valuable, and often develop complex or proprietary selection and trading systems.
What is Passive Management?
Passive investment management makes no attempt to distinguish attractive from unattractive securities, or forecast securities prices, or time markets and market sectors. Passive managers invest in broad sectors of the market, called asset classes or indexes, and, like active investors, want to make a profit, but accept the average returns various asset classes produce. Passive investors make little or no use of the information active investors seek out.
Balancing of Active and Passive Management
By combining an appropriate combination of Active and Passive investment strategies together can achieve favourable results at a lower cost.
In conclusion, the Destiny Portfolios have consistently produced returns that the GIB Investment Team and the Trustees are proud of. The desire for future consistent growth necessitates change and the inclusion of the Dibanisa SWIX Top 40 is a small change but a significant step in the continued journey to consistent, reliable returns for the members of Destiny.