Please click on the relevant sections below for information on our investment process and philosophy.

Fund Selection

In selecting appropriate passive funds there are many factors to consider and it is not just a simple matter of choosing an index tracker in each sector. 

Index tracking can in itself be costly and expensive. Please click on the chart below that shows buying/selling to track an index reduces tracking error but generates transaction costs.

Stocks that are added to an index commonly enter a period of abnormal price escalation after the announcement and through the effective date. This results from speculative buying pressure. After the effective date, stocks experience a price decay resulting from lightened demand.

Traditional index managers with rigid tracking policies must acquire the stock when the price is climbing. Buying the stock before the effective date may reduce tracking error, but it also raises both acquisition and transaction costs.

Click image below to enlarge

A more flexible trading policy enables portfolio managers to avoid the heaviest trading days and higher prices by deferring the transaction to a more opportune time. This can add value through reduced costs and lower acquisition price.

The flexible trading policy can bring advantages of lower turnover, lower costs of trading, patient trading, and a premium to provide liquidity to the market.

We recommend, where possible, passive funds that look to target market returns in each of the asset classes as opposed to a pure index tracking strategy.

Next › ‹ Back