Active vs Passive Portfolio Management

Active vs Passive Portfolio Management

Ever wondered what the difference between actively and passively managed portfolios are? Apart from a sizable difference in fees paid to the asset managers, the main difference between the two approaches is market timing. 

It is important to note that one is not superior to the other. However, there is empirical evidence that supports passive management in the sense that we as human-beings are not able to outperform the overall market over time. It is however possible to achieve above market returns through active management but, once again, it comes down to the timing element of the actively managed portfolio.

Passively managed portfolios

A passively managed portfolio is the process of tracking the returns of the general market or certain segments of the market as closely as possible. This is well suited for investors who have a longer than average investment time-horizon. Meaning that over time it is pointless in trying to beat the overall market by overweighting the portfolio exposure within certain companies or asset classes because we want to achieve higher returns than what the overall market is prepared to give us.

Actively managed portfolios

An actively managed portfolio is a portfolio in which a portfolio manager or a portfolio management team makes decisions on how the funds in the portfolio are invested. This is done in an attempt to outperform the market or benchmark against which return of the portfolio is measured.

Passive portfolio management comes at a much lower cost than active management purely due to the amount of work that goes into each. Active management requires a team of portfolio managers who actively do research and analysis to find the best opportunities suited for the investment goal of the actively managed portfolio.

Who are we? 

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

What we offer

Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the remuneration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.  

Disclaimer

This report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Information and content

The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).