A passive investment strategy has potential benefits, including lower fees, greater transparency and tax efficiency. But where passive funds are designed to mimic a market index, the intention behind an actively managed ETF is to outperform a market index.We actively choose a broad range of ETFs, assigning and re-assigning our clients’ money based on our rigorous analysis of the global economy. We will utilise active ETFs where we believe there is a strong rationale for doing, though allocations are unlikely to make up a large proportion of portfolios. Additionally, we do allocate to “smart beta” ETFs, which track specially constructed indices. These are often constructed to deal with specific inadequacies or excessive bias in some markets. Commonly these indices weight holdings according to
other fundamental factors (such as dividend payouts or other characteristics), rather than simply using market capitalisation as the weight, however they remain rules-based in their approach.