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Active vs Passive Investing

Actively managed mutual funds have generally lagged passive index funds in recent years.

Such an outcome is not uncommon several years into a bull market. Many active managers focus on companies with higher quality characteristics, including strong balance sheets and a history of generating earnings. However, a bull market can be like a rising tide that lifts all boats, not distinguishing between high quality and low quality companies. Low quality companies including those with no earnings often outperform when risk is not top of mind for many market participants.

During a bear market, it is common for active managers to outperform as lower quality companies may experience the sharpest declines (chart).

As we approach the seventh year of this bull market, we believe investors should maintain exposure to actively managed mutual funds that have demonstrated a history of success across market cycles.

2.16.15

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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