Active strategies offer tremendous flexibility to address specific financial needs - both on their own and as complements to passive strategies within a well-diversified portfolio.


WHAT ACTIVE DOES BEST
 

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Manage Risk

Unlike passive strategies, active strategies can adjust holdings to limit the impact of market drawdowns, helping to preserve capital during adverse conditions.

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Capture Value

Short-term prices don’t always reflect long-term value – creating opportunity for active managers with the skill and patience to identify assets with the potential to appreciate.

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Focus on Outcomes

Investors who have specific needs (such as retirement income, portfolio diversification, or particular level of return) can turn to active strategies tailored to those needs.



WHEN ACTIVE MAY HAVE THE ADVANTAGE
 

The more diverse and complex the asset class, the harder it is to construct an index that’s truly representative of current and future opportunities. Emerging market equities are a classic example: active managers with deep analytical resources are well-equipped to target the most attractive stocks in these rapidly evolving countries and cultures.

Yet active managers can add value even in mainstream sectors as well like U.S. large-caps. How? Through patient, in-depth analysis of the companies behind the stocks. Example: ClearBridge’s use of  Environmental, Social and Governance (ESG) ratings to help identify firms with sustainable earnings to support long-term growth. The same level of scrutiny informs Western Asset’s approach to fixed income, including the widely traded municipal bond market.

Value of Active Management

Active management does not ensure gains or protect against market declines. 


 

PASSIVE HAS RISKS, TOO

Many investors mistake passive strategies as being somehow “safer” than their active counterparts. But all investments have risks, and it’s important to recognize those specific to the indexes tracked by passive strategies. In equities, the S&P 500 is heavily tilted toward a handful of stocks. In bonds, the Barclays Bloomberg U.S. Aggregate Index is concentrated in sovereign debt, like Treasuries, that have relatively high duration risk.

FLEXIBILITY IN TIMES OF VOLATILITY

The value of active strategies’ ability to act differently than an index is never clearer than when markets are challenged by volatility. After all, passive strategies capture all an index’s gains – but also all its losses when times are tough. Active managers, in contrast, can proactively shift positions during declines to seek shelter and better preservation of capital.


 

All investments involve risk, including loss of principal. Past performance is no guarantee of future results.