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Active vs. Passive Investing Styles: An Age Old Rivalry

Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.

However, no one strategy always triumphs. It cannot be ignored that both investing strategies have positive attributes and have helped define the historical and current investing trends we have witnessed in the retirement marketplace.

As a retirement advisory firm, HANYS Benefit Services (HBS) consults with fiduciaries to help them design a fund menu that will utilize the most appropriate investment style per asset class, customized for their Plan’s demographic. HBS recognizes that the selection and monitoring criteria of passive and active strategies should be tailored to their inherent differences. Helping fiduciaries craft an Investment Policy Statement (IPS) that establishes separate monitoring criteria for each investment style allows for each to be held to their own unique standards.

In Active vs. Passive Investing Styles: An Age Old Rivalry, HBS traces the origins of the active and passive investing styles, dives into the historical performance and asset flow trends of each, and addresses how plan sponsors can make prudent decisions about employing each investing style.

If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (800) 388-1963 or e-mail us at hbs@hanys.org.

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