In our Special Bulletin, ‘Challenge Accepted – Our Approach to Selecting Active Funds’ sent to clients earlier this year, we set out our thoughts on why we continue to recommend active funds over investing in passive or index trackers. That note provided some insight into our active fund selection process, particularly the more qualitative characteristics we look for in a fund, such as the manager’s investment philosophy, how this philosophy is put into practice and the quality of the manager and team themselves. This note, by way of follow up, highlights some of the more quantitative attributes we seek out when narrowing our fund universe in order to find ‘best of breed’ fund managers. We also consider some of the published academic research in this area, provide some real-life examples of how we have put this research to use through our fund selection process, and show how this has contributed to our UK model portfolio adding considerable value versus the index, sector and a low-cost tracker fund.
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