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An Index Isn't a Fiduciary

July 2020 
By Adam Berger, CFA

The “active versus passive” debate misses the mark, as both approaches may have a role to play. The question is how investors allocate between the two.

From our sub-adviser, Wellington Management
Adam Berger, CFA
Multi-Asset Strategist


“It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” This quote from Upton Sinclair might resonate with proponents of passive investing who find themselves faced with another argument for active management, written by a commentator whose salary is indeed paid for by active management.

But mindful of the immense challenges faced by institutional investors today and inspired by my firsthand observation of highly skilled asset managers over more than 20 years, I think it is worth sharing several reasons why I believe active management has a meaningful role to play in investors’ portfolios, even (and perhaps especially) in a world where passive investing may too. I frame this argument through seven concerns that I believe investors must address as they consider how passive and active strategies can help them achieve their investment objectives.

Important Risks: Investing involves risk, including the possible loss of principal.

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