Active and passive investment critical for bettering returns

by Trust Matsilele 0

According to Wehmeyer Ferreira from Deutsche Securities, the combination of the two options helps in taking away part of the risks on investment even though this also takes away the excitement of which investment out performs the other.

“Passive investment is an investment where the manager passively tracks the index he does not try to outperform or take different views from the index,” Ferreira told CNBC Africa.

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“Active management is where a portfolio manager set the benchmarks and he tries to outperform those benchmarks.”

Ferreira posited that South African market was predominantly a passive investment economy.

“In South Africa we are passive product providers through our exchange traded funds (ETFs), but we don’t see it as being an either or mutually exclusive with active management, we see the two actively complementing each other well,” he noted.

“The combination takes part of the risk away so you can employ this strategy from being the most conservative investor to being more adventurous.”

Ferreira added that, if you are a professional investor you can do it yourself and if you are not you can engage services of a financial advisor and that portfolio will depend on what your risk appetite is.

“If you look at our five ETFs that covers most of the developed markets, we have increased assets from start of 2013 at around 2.2 billion rand to seven billion rand, performance in those assets have been in excess of 20 per cent over the last year,” said Ferreira.

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“We had a favourable market through rand appreciation as well as offshore equity market performing well,” added Ferreira.