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The right questions to ask managers about their operational risks.

In this brief article, I’ll take the middle ground in the battle raging between active and passive managers and commentators around which strategy is “best”.

My advice to the trustee couldn’t be more simple: Invest in a low cost index fund. I believe the long-term results will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high fee managers.” – Warren Buffett

There are various decisions an investor needs to make when investing in passives. Determining the best or most appropriate passive index for a particular investor looking into the future is extremely difficult.

As portfolio managers within a multi-management business, it is our duty to consider the full opportunity set when constructing portfolios to meet client requirements or fulfill our mandates.

It is important to understand that we are only talking about the investment side of meeting goals here, and that financial planning is a much broader topic that will directly impinge on the ability to meet a specific goal if not directly addressed.

“Your client asks you to build a goal-based portfolio that can achieve CPI+5% per annum over-rolling
six year terms (which is part of a range), how do you build it?”. – Malcolm Holmes

The financial advisory landscape has changed remarkably over the past decade. The start of this new “era” came in 2002 with the publication of the FAIS Act which set minimum standards of qualifications and professionalism for financial advisers.

The most important objective in saving for retirement for the average individual would be to live comfortably in retirement
and not to outlive one’s money.

Evaluating the performance of an asset manager is often subjective. Broadly speaking, there are three elements to consider:

If you lost 50% of your money, what return would you
subsequently need to get back to your original investment?
Your gut instinct would probably be to say 50%, since that
is how much you lost.