More investors urged to consider active investments to create a balanced portfolio

News - Funds

Written by Ray Clancy

Tuesday, 30 November 2010 10:26

Using active and passive investment vehicles in tandem leads to the best portfolio management, it is claimed.

Yet over half, 59%, of Britain’s sophisticated retail investors are unlikely to invest in passive funds in the next six months, according to the Legal & General Investments What Matters Investment Index.

The comprehensive study revealed that active investing clearly appeals to those with larger portfolios, with over half, some 54%, of those with a portfolio value of over £200,000 saying they were ‘likely’ or ‘very likely’ to invest in active funds over the next six months. This is compared to just 18% of those with under £5,000.

‘There is significant value to both active and passive portfolio management and using both vehicles in tandem plays a key role in creating a balanced portfolio. However, given the volatility of markets and the fact that economic cycles are likely to be shorter at the moment, it is understandable that investors are looking to actively managed funds for security over the next six months,’ said Robert Churchlow, head of active equities at Legal & General Investment Management.

‘Active fund managers have the resource to perform in depth analysis in order to hedge out risk and select the strongest companies from any given sector,’ he added.

Encouragingly, almost a third, 28%, of those with over £200,000 said they had a collaborative approach with their Independent Financial Advisor when it comes to making investment decisions, while 16% let their adviser both recommend investments and execute them on their behalf.

‘Active investment is the choice for those private investors at the top end of the scale, for many of whom, working closely with an adviser is standard. However, the size of the investment is really irrelevant. Much more important is what you do with it,’ said Simon Ellis, managing director of Legal & General Investments.

‘And this is what we’ve got to get people to realise. Saving is important, planning is important and having the confidence to do both is essential. As an industry, we’re here to make sure investors have this confidence,’ he added.