San Francisco, Dec. 10, 2013 (GLOBE NEWSWIRE) -- The conventional wisdom that index strategies generally outperform actively-managed ones is contradicted by mutual fund and exchange-traded fund (ETF) performance data, states a new analysis by Forward (Forward Management, LLC).
"At a time when some are proposing that 401(k) plan menus be limited to index strategies, the active-passive debate is hardly an academic one," said Alan Reid, CEO of Forward. "Our research shows that simplistic, broad-brush conclusions are misleading. They do a real disservice to investors who need diversified, resilient portfolios that can deliver positive results under a variety of market conditions."
Titled Active vs. Passive: Investing in Efficient and Inefficient Markets, the Forward study found that from 1990 to 2012, in 15 out of 30 asset classes, active management strategies generated higher average annual returns than index funds. Actively managed funds also produced higher monthly returns in 19 out of 30 categories surveyed. While index funds produced superior returns in many efficient and liquid markets, such as large-cap domestic equities and government bonds, active strategies outperformed in many specialized and less efficient categories, such as geographic- and industry-sector strategies.
Forward's study surveyed monthly returns, after fees and expenses, for mutual funds and ETFs in 30 categories going as far back as 1990, depending upon the availability of asset class data.
"These findings support our belief that there are areas in which active managers can add value through their research and trading," said Reid. "Moreover, I believe that active managers who can quickly respond to changing circumstances may have an advantage in asset classes that are especially vulnerable to unforeseen market, economic or political shifts."
Differences in methodology may explain why some past studies have found passive strategies to outperform most of the time, said Reid. "The most important finding of our study is that both active and passive strategies have their place in portfolio construction," he concluded. "With our retirement system approaching crisis and major policy decisions at stake, now is the time to discuss how to best construct portfolios that can provide alpha generation, uncorrelated return streams and volatility management according to the needs of each investor."
About Forward
The world has changed, leading investors to seek new strategies
that better fit an evolving global climate. Forward's investment
solutions are built around the outcomes we believe investors need
to be pursuing - non-correlated return, investment income, global
exposure and diversification. With a propensity for unbounded
thinking, we focus especially on developing innovative alternative
strategies that may help investors build all-weather portfolios. An
independent, privately held firm founded in 1998, Forward (Forward
Management, LLC) is the advisor to the Forward Funds. As of
September 30, 2013, we manage more than $5.5 billion in a diverse
product set offered to individual investors, financial advisors and
institutions. More information on Forward can be found at www.forwardinvesting.com.
You should consider the investment objectives, risks, charges
and expenses of the Forward Funds carefully before investing. A
prospectus with this and other information may be obtained by
calling (800) 999-6809 or by downloading one from www.forwardinvesting.com.
It should be read carefully before investing.
Alpha is a coefficient measuring risk-adjusted
performance.Correlation is a statistical measure
of how two securities move in relation to each other.
Volatility is a statistical measure of the
dispersion of returns for a given security or market index.
RISKS
There are risks involved with investing, including loss of principal. Past performance does not guarantee future results, share prices will fluctuate and you may have a gain or loss when you redeem shares.
Diversification does not assure profit or protect against risk.
Alan Reid is a registered representative of Forward Securities, LLC.
Forward Funds are distributed by Forward Securities, LLC.
Not FDIC Insured | No Bank Guarantee | May Lose Value
©2013 Forward Management, LLC. All rights reserved.