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This is the final blog in our series exploring the evolving relationship between active and passive investment strategies . Throughout this journey, we've made one thing clear: this is no longer a binary debate . The key isn’t to pick a side — it’s to focus on what works best for the client.   Blending investment styles gives planners the flexibility to construct portfolios that are diversified, adaptive, and aligned with client objectives. Ultimately, this approach is about better outcomes , particularly when it comes to managing risk and ensuring consistency over time.   Why Blend?   If there’s one image to carry with you from this series, it's the iceberg  analogy. A passive-only strategy may steer straight into the problem and wait for recovery. Active managers, on the other hand, have the discretion to adjust course. But neither strategy is infallible on its own.   By blending both active and passive strategies , planners can: ·        Diversify across investment styles as well as asset classes ·        Reduce exposure to manager-specific or market-specific risks ·        Create a more balanced, smoother return profile  over time   Evidence: Morningstar’s 2023 report on blended portfolios noted that combining active and passive strategies often resulted in better risk-adjusted returns than portfolios that used only one style.   While a blended approach may incur slightly higher fees, the aim is not just to match the market — it's to deliver outcomes above the average , particularly in volatile or transitional markets.   Building Blocks: How to Combine Active and Passive   Think of a well-diversified portfolio like a well-designed building: the foundation may be standard, but the materials and design features must adapt to the context.   Core exposures  — such as global developed equities, UK large-cap or US indices — can often be served well by low-cost passive funds  or ETFs. Satellite exposures  — such as emerging markets, thematic strategies, small caps or ESG-focused mandates — may benefit from active management , where inefficiencies and opportunity gaps are greater.   You can also introduce a tactical overlay , using model portfolios or strategic tilts to adjust asset allocation during changing market conditions.   Blended portfolios are dynamic — they’re built with adaptability in mind.   The Role of Research and Monitoring   There’s a common misconception that passive investing removes the need for due diligence.   That’s not true.   Even with passive funds, planners must understand:   The index methodology  being tracked Cost differentials  between providers The sector and regional biases  within certain benchmarks   With active managers, due diligence goes deeper — evaluating style drift, consistency, and process repeatability.   At QuantQual, we support advisers by:   Conducting research across both active and passive solutions Evaluating fund performance and risk characteristics Helping advisers monitor, compare, and evidence their chosen blend   This ongoing research is key to delivering sustainable client outcomes under frameworks like Consumer Duty .    Case Study: A Blended Portfolio in Practice   Here’s a simplified example of a blended 60/40 strategy designed for a balanced investor:   This blend offers:   Cost efficiency  via core index funds Targeted return enhancement  through active thematic and fixed income exposure Downside risk management  by avoiding rigid index allocation   Over time, such a portfolio could deliver greater resilience in volatile markets , while still maintaining fee discipline.   Conclusion: Active and Passive as Partners   It’s time to move beyond the idea that investors must pick a side. The active vs passive investing  debate is outdated.   Today’s investors deserve portfolios built for outcomes — not ideology. That means using the best tools available, whether they’re passive or active, to meet a client’s goals in a structured and transparent way.   It’s not about choosing sides. It’s about building the right mix — for the right goals, at the right time.

The debate between active and passive investing has been ongoing for decades. On the one hand, passive investing offers simplicity, lower costs, and—statistically speaking—better results for many investors. On the other, active fund managers argue they offer diversification, flexibility, and the potential to outperform.   But in truth, the question shouldn’t be “Which is better?” It should be, “What’s right for this client, in this market, given their objectives?”   As the FCA rightly points out, the focus should always be on client outcomes . In this blog, we explore the active vs passive debate through three key lenses: Fees, Flexibility, and Focus .   Fees: Is Cheaper Always Better?   It’s easy to assume that lower fees equal better value. After all, cost is a tangible number—value is not.   Passive strategies, especially index funds and ETFs, are known for their low costs. Campaigns often highlight how lower fees can significantly boost long-term returns. And studies like the S&P Dow Jones SPIVA Scorecard  consistently show that the majority of active managers underperform their benchmarks over time, particularly in efficient markets like the US.   But here’s the catch: all performance is reported after fees . A well-selected active manager who charges more but consistently adds alpha can still leave an investor better off.   Example: A 30-year-old invests £10,000 for 30 years with a 5% net return. This grows to £43,219.If an active strategy delivers 7% net, the final value is over £76,122 .That’s a £32,903 difference — despite higher fees.   The point? Low fees don’t always equal high value. The real question is: what am I paying for—and am I getting it?   Flexibility: Active vs Passive - Who’s Steering the Ship?   Passive investing is like being on autopilot. You follow the market—wherever it goes. If there's an iceberg ahead, you're staying the course.   That’s fine if you're confident the ship will stay afloat long-term. But active managers can grab the wheel. They can reduce risk, increase cash, avoid distressed sectors, or lean into high-conviction opportunities.   Analogy: ·       A passive fund hits the iceberg and waits for recovery. ·       An active fund tries to steer around it—or avoid that part of the ocean altogether.   Not all passive funds are created equal, of course. Some use enhanced indexing or smart beta strategies, adding a layer of decision-making. These often come with slightly higher costs but may improve risk-return characteristics.   The best active managers use their discretion to avoid problematic sectors and seek new opportunities—especially in less efficient markets  like small caps, emerging markets, or high-yield bonds.   Focus: Goals, Outcomes and Behaviour   Investing should always start with the why . Pure passive funds offer broad market exposure and can suit long-term investors who want to keep costs down and avoid making timing errors.   But they lack personalisation. They can’t exclude industries a client may want to avoid (e.g., tobacco, fossil fuels). They can’t lean into specific themes (e.g., renewables, innovation). That’s where active investing can align better with sustainability goals , ethical preferences , and investment narratives .   There’s also a behavioural advantage in working with advisers and using active managers: keeping clients invested. The real destroyer of wealth isn’t fees—it’s panic selling and emotional decisions.   Blending styles—such as a passive global equity core with an active thematic or fixed income sleeve—can help smooth returns, offer diversification across styles, and manage behavioural risks.   Conclusion: Choosing with Eyes Wide Open   The debate between active and passive doesn’t need to be a zero-sum game. It’s not about sides—it’s about balance.   At QuantQual, we believe a blend of styles, informed by client objectives and market context, is often the best way to manage risk and support outcomes. By looking through the lenses of fees , flexibility , and focus , financial planners can build strategies that are aligned, adaptive, and evidence based.

Introduction: Making Sense of the Investment Landscape In today’s investment landscape, the loudest voices often get the most attention, regardless of whether they represent the majority view. We see this in politics and increasingly in fund management, with the growing popularity of low-cost, passive investment strategies. But the real challenge isn’t choosing one side over the other. It’s finding the right balance. For financial planners and self-directed investors alike, blending different investment styles—rather than choosing between them—can lead to better outcomes. That’s where the core and satellite  approach comes in.   What Is Core and Satellite Investing? Think of the solar system: at the centre is the sun—the core—while the planets orbit around it. Your investment portfolio can work the same way. In this strategy, the core  is typically built from low-cost, broad-market exposures, often passive in nature. Around this core, you place satellites : more tactical, thematic, or opportunistic investments aimed at enhancing returns or diversifying risk.   Benefits of the Core and Satellite Approach Diversification: Blends different asset classes, sectors, and styles Cost Control:  Keeps overall portfolio fees lower by using passive funds at the core Alpha Potential:  Satellites provide room for active managers or niche strategies to outperform Behavioural Discipline:  A stable core can help investors stay invested during market volatility   How to Build a Core and Satellite Portfolio 1. Establish Your Core Usually composed of global equity or multi-asset passive funds (e.g., MSCI World, FTSE All-World) Focused on efficient market exposure, simplicity, and low cost 2. Select Your Satellites Examples include: Thematic funds (AI, clean energy) Active fixed income or income-focused strategies Emerging markets or small-cap active funds Style-based tilts (value vs growth) Aim to capture areas where active managers are more likely to add value 3. Determine Weightings A common split is: Core = 60–80%, Satellites = 20–40% This can be adjusted based on investor risk tolerance, goals, and the strength of conviction in active strategies   Common Pitfalls to Avoid Over-diversifying : Too many satellite positions can dilute the overall portfolio impact Chasing performance : Switching strategies based on short-term trends undermines discipline Neglecting the core : Losing sight of the long-term strategy by focusing too much on tactical plays   Example Portfolio Insights Constructing a core and satellite portfolio isn’t about picking random funds—it requires research and intention. Fixed Income : Often better served by active managers who can navigate duration, credit, and sector risks. Global Equities : Passive funds can work well, but they often have regional or sector biases. Blending with an active global equity fund can improve balance. US Equities : Highly efficient markets favour passive, but small-cap active strategies may still provide an edge. The takeaway? Strategic blending doesn’t necessarily mean significantly higher costs. But it can offer the potential for better long-term outcomes.   Is This Approach Right for You or Your Clients? This strategy won’t suit everyone. If your objective is to keep costs ultra-low and you’re content with average market returns, a fully passive approach may be more appropriate. But core and satellite investing can be ideal for those who: Believe in active management but want to keep costs under control Are comfortable monitoring and adjusting parts of their portfolio Value a structured, disciplined framework for long-term investing   Conclusion: Balance with Flexibility The debate between active and passive is often unhelpfully binary. In truth, it’s not about choosing one over the other—it’s about combining them thoughtfully. A core and satellite strategy brings structure, cost efficiency, and the opportunity to improve returns. And remember, just 1% extra return annually—after fees—compounded over 20 years can make a profound difference to long-term wealth.

In the UK, around 25%  of retail investment assets are held in tracker (passive) funds, according to the Investment Association. In the US, the shift has been even more dramatic, with over 50%  of fund assets now in passive strategies. It's easy to see why: with passive investing, you know your return — it mirrors the market — and you benefit from low costs and simple structures.   The narrative around passive investing has understandably dominated for years. It's an easy sell: low fees, clear returns, and no need to 'beat the market.' And indeed, multiple studies — such as the SPIVA® U.S. Scorecard  — have regularly shown that most active managers underperform their benchmarks over the long term.   Yet, a more nuanced picture is beginning to emerge.   Rather than framing it as a binary choice — passive or active — more investors are recognising that different styles work in different markets. For example, active management often dominates in less efficient markets  such as emerging markets, smaller companies, or fixed income, where opportunities for mispricing are greater. Conversely, in highly efficient markets  like large-cap US equities, passive strategies often hold the advantage.   What’s becoming clearer is that investors no longer have to settle for the average. A thoughtful blend of active and passive strategies  can, over time, lead to above-average outcomes, especially when compounding returns  are considered. It’s perhaps this growing realisation — that combining approaches can optimise performance — that is driving the quiet but noticeable resurgence of interest in active funds.   A Look Back: The Rise of Passive Investing   The rise of passive investing can be attributed to several converging factors. The post-financial crisis era saw vast amounts of money pumped into the markets, alongside a period of low interest rates and low inflation, which arguably favoured a broad-based, market-tracking approach. At the same time, the growth of DIY investing  changed the way many individuals approached their financial futures.   Driven largely by cost-consciousness, DIY investors increasingly turned to passive strategies. Much like the home improvement boom — where many believed they could plumb a bathroom only to later call in a professional — many investors initially underestimated the challenges of managing their own investments. Low-cost trackers appeared to offer an easy, low-risk solution.   In the US particularly, passive fund flows have overtaken active in recent years, reshaping the investment landscape. Investor behaviour has also shifted. Instead of buying and holding individual stocks, there is a greater tendency to trade — making ETF structures , which can be bought and sold quickly and cheaply, an especially attractive option.   Passive investing wasn't just a trend — it became a mindset: low cost, efficient, easy to understand, and always available at the click of a button.   Why Active Funds Are Making a Quiet Comeback   Just as certain conditions favoured the rise of passive investing, today's environment is increasingly playing to the strengths of active managers.   The End of Free Money   For over a decade, ultra-low interest rates and quantitative easing created a backdrop where almost every asset class rose in value. Many investors have never experienced a "normal" environment of higher interest rates and inflation. In this new reality, cheap money is no longer fuelling indiscriminate market gains, and value matters again. Active managers have the flexibility to avoid overpriced sectors and companies, positioning portfolios more selectively.   Market Volatility and Dispersion   While volatility is not new, it now comes with greater dispersion between winners and losers . In more volatile markets, passive strategies simply buy everything — good and bad — while active managers can pick their spots, taking advantage of pricing inefficiencies  and navigating risk  more dynamically.   Changing Macroeconomic Conditions   Rising geopolitical tensions, slower global growth, and shifting monetary policies have made broad market investing more challenging. In such uncertain environments, active managers can be more nimble, adjusting sector allocations, currency exposures, and risk profiles in real time — advantages passive funds simply don't offer.   Sustainability and ESG Factors   There remains considerable confusion around ESG investing. Many passive "ESG" indices focus on business metrics  like governance, not necessarily true environmental or social impact. For example, the FTSE4Good Index  includes oil majors and mining companies — highlighting that ESG scoring often rewards good governance rather than environmental leadership.   Understanding an investment’s true sustainability credentials often requires more than just a label — it demands active engagement  and disciplined exclusion strategies  that are typically only achievable through active management. Investors seeking genuine alignment with sustainability goals increasingly recognise the importance of active oversight.   Where Active Management Is Seeing Most Success   Rather than seeing active and passive investing as opposites, it’s more helpful to view them through the lens of investment styles and market types . There are certain areas where active strategies consistently demonstrate a natural advantage:   Sustainability, ESG, and Impact Investing   When it comes to responsible investing, active management often plays a crucial role.Passive ESG funds typically track broad indices that screen companies based on predefined metrics, but they rarely offer a deep understanding of true sustainability practices  or positive social impact .   In contrast, active managers can build genuinely aligned portfolios — applying detailed exclusion policies , proactively engaging with companies , and even targeting positive impact outcomes .   Emerging Markets   Emerging markets are diverse, complex, and less efficient than developed markets.Tracking an emerging market index can expose investors to political risks, governance issues, or over-concentration in dominant sectors. Active managers add value by avoiding weaker companies  and seeking out under-researched, high-growth opportunities .   Smaller Companies and Niche Markets   Small-cap stocks and specialist sectors are another area where active management shines. Many smaller companies receive limited analyst coverage, meaning there is more scope for skilled managers  to uncover undervalued opportunities or avoid hidden risks. Similarly, niche sectors — such as biotechnology, clean energy, or frontier markets — often require deep research and industry knowledge  that passive strategies are not equipped to deliver.   Challenges Still Facing Active Funds   One common misconception is that passive investing requires no research. In reality, whether choosing active or passive strategies — or blending different styles — it is vital to understand what sits beneath the bonnet . Even passive funds vary widely in construction, concentration risks, sector biases, and ESG integration.   However, active funds arguably demand an even greater level of due diligence.   Investors and advisers must not only assess past performance but also understand a manager's investment style, process, and philosophy  — including when that style might be out of favour and how the fund might behave across market cycles.   Another ongoing challenge for active funds is fees .   While active managers offer the potential for outperformance, higher charges can erode returns, especially during periods of modest market growth. The pressure to demonstrate value after fees  remains intense — and rightly so.   Selecting the right active funds requires patience, research, and realistic expectations . Without this, the risk of disappointment — and underperformance — remains high.   What This Means for Investors   The key takeaway is that investment styles can be blended thoughtfully  to create better outcomes  for investors.   Cost no longer needs to be the sole deciding factor. For example, a Managed Portfolio Service (MPS) blending active and passive strategies recently offered a total charge of just 0.29%  — not far above the 0.20% fee  typically charged by pure global passive portfolios. As institutional pricing becomes more widely available, we can expect costs to fall further, even within actively managed solutions.   This trend offers investors a significant opportunity: you no longer have to settle for "average" returns at low cost. Instead, you can access above-average potential  through well-constructed blends — combining passive efficiency with targeted active insights.   Of course, achieving this requires expertise. Researching and selecting active managers can be time-consuming and complex . However, this burden doesn’t have to fall on individual investors. It can be outsourced to professional investment houses  that specialise in building cost-effective, blended portfolios  designed to deliver the best possible outcomes.   In short, the investing landscape is evolving — offering greater choice, better structures, and the ability to aim higher without sacrificing efficiency.   Conclusion: A Shift, Not a Stampede   Vinyl records were declared dead... but they made a comeback.   The same could be said for active management. Despite years of being overshadowed by passive strategies, active investing still holds an important role — particularly when thoughtful research, selective opportunities, and a shifting market environment align.   As we move into a more normalised world of higher interest rates, greater volatility, and selective growth , revisiting the role of active funds could offer a valuable edge for investors willing to look beyond the average.

Liberation Day finally landed on 2 April. Unsurprisingly, markets reacted negatively. What did surprise me, however, was the Fear and Greed Index, which has moved into Greed territory for the first time since Trump was elected.   It’s fair to say it has been a strange few weeks in markets.   What Has This Meant for Markets?   Some of the stats from April make for interesting reading:   United States: The S&P 500 dropped 0.76% in April, bringing its year-to-date decline to 5.31%. The Dow Jones Industrial Average fell 3.17% for the month, now down 4.41% year-to-date.   Europe: European markets demonstrated resilience amid the turmoil. The Stoxx Europe 600 index showed less volatility compared to U.S. indices and is up around 4% year-to-date.   Asia: Hong Kong's Hang Seng Index was one of the top performers, achieving a 14.68% year-to-date gain as of early May.   For clients invested in strategies with an overweight to the US, it’s clear that this year may not have been particularly favourable so far. However, more broadly diversified portfolios—especially those with allocations to Asia and Europe—may have delivered better outcomes.   This highlights why diversification across regions, not just asset classes, matters so much in a changing world.   Surely the US Will Bounce Back   I would never bet against the US completely—it remains one of the most innovative economies globally. However, the Fear and Greed Index paints an intriguing picture. While headline sentiment shows Greed, under the bonnet, market momentum indicators are still in Extreme Fear territory.   This suggests the "greed" might be short-lived, driven by buyers snapping up what they perceive to be cheap stocks rather than based on underlying economic strength. A reminder that emotion, not just fundamentals, often moves markets in the short term.   (Example: In late 2018, despite strong fundamentals, panic selling drove sharp corrections before a full recovery in early 2019.)   The Next Ten Years Will Match the Next Ten Years   It’s easy to believe that history repeats, but decades rarely follow the same script:   1980s: Japan’s Nikkei 225 Dominates Nikkei 225 surged nearly 400%, driven by Japan’s economic boom and asset price bubble. S&P 500 gained approximately 227%, supported by economic expansion and the early tech revolution. FTSE 100 increased by about 125%, reflecting strong UK growth during the Thatcher years.   1990s: US Tech Boom S&P 500 soared over 400%, fuelled by dot-com innovation. NASDAQ Composite skyrocketed by more than 800%, as technology stocks led the charge. DAX (Germany) rose approximately 300%, helped by the post-reunification boom.   2000s: Emerging Markets Shine MSCI Emerging Markets Index gained around 150%, led by Brazil, Russia, India, and China (BRICs). Brazil’s Bovespa increased by over 200%, driven by commodity demand. S&P 500 saw a modest -10% decline, impacted by the dot-com crash and the 2008 financial crisis.   2010s: US Leadership Reasserted S&P 500 climbed approximately 250%, driven by an extended bull market. NASDAQ Composite advanced over 400%, led by the FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks. Nikkei 225 grew by about 160%, marking a recovery after decades of stagnation.   A Changing Global Landscape   The world is shifting. China’s economy continues to grow faster than that of the US, and it is now less dependent on US demand than it was even a decade ago. While tariffs may have been politically popular, history shows they tend to hurt the end consumer and ultimately slow down growth.   (Example: The Smoot-Hawley Tariff Act of 1930 is widely credited with worsening the Great Depression.)   What matters for investors today is not where the world has been, but where it is going. The coming decade will likely be shaped by:   The rise of Asia as an economic power bloc Increased focus on sustainability and energy transitions Growing importance of technology and innovation beyond Silicon Valley   Conclusion: A Roller Coaster Ride   Most investors will be glad to see the back of April. What initially seemed like sheer madness now appears to have calmed slightly. Perhaps there was some logic to weakening the dollar and reducing debt repayment burdens—but the global impact of these moves will likely be felt for a long time to come.   Despite the noise, returns have remained achievable. And it’s worth remembering: decades don’t always repeat, and a well-diversified approach remains the best defence against an unpredictable future.

In recent years, passive investing  has taken centre stage. According to Morningstar, over 50% of all US equity fund assets were held in passive vehicles in 2023. In the UK, the Investment Association reports that around 25% of assets are now in index funds .  Over the past two decades, this shift from active to passive investing has been one of the most significant structural changes in the investment world. But what’s driving the change, and where might the passive approach fall short?   Evolving Advice Models   Before diving into the core drivers of the passive revolution, it's worth reflecting on how financial advice has evolved.   Historically, advice was product-focused. Then, it became investment-led. Today, financial planning  sits at the heart of advice. Many advisers now recognise that their true value lies not in fund picking, but in helping clients define and achieve long-term goals.   As a result, many are outsourcing investment management. This can naturally lead to a preference for simpler, research-efficient solutions, including passive strategies .   Why Passive Investing Has Gained Ground   Three key factors can largely explain the rise of passive investing:   Cost and Simplicity   Passive funds are significantly cheaper than actively managed funds. In low-return environments, lower fees can make a noticeable difference to overall returns. Investors also appreciate the transparency – they know exactly what they’re investing in, and that the fund is simply tracking a chosen index.   Active Underperformance   Data from SPIVA (S&P Indices Versus Active) consistently shows that most active fund managers fail to outperform their benchmarks over time. For many, this raises a simple question: why pay more for underperformance?   Behavioural Comfort Passive strategies offer psychological comfort. Investors are increasingly content to "own the market" rather than attempt to beat it, particularly when they understand what they hold and why.   But Is It Game Over for Active Management?   Despite the strength of the passive argument, it's worth noting that only 25% of UK fund assets  are held in index-tracking vehicles. There are valid reasons to be cautious about going “all in” on passive investing.   Passive Still Requires Research   Choosing an index fund doesn’t eliminate the need for due diligence. Should you use an ETF or a mutual fund? A pure index or a “smart beta” approach? Not all passive strategies are created equal, and the differences can affect client outcomes.   Concerns Over Market Distortion   An untested but growing concern is that widespread passive investing could lead to market distortions. Because index funds buy and sell based on market capitalisation, not fundamentals, there’s a fear that poorly performing companies may continue to attract capital simply because they’re in the index.   No Downside Protection   Passive strategies track the market, which means they rise and fall with it. In a downturn, there is no mechanism for protection or risk management. Active managers, at least in theory, can move to cash or shift exposure to more defensive assets. Many investors want their money to reflect their values. While some ESG index funds  exist, they often lack the depth, engagement, and customisation of actively managed sustainable funds. For investors who care deeply about sustainability, passive may not go far enough.   Passive Isn’t Perfect – But It Has a Role   It’s easy to highlight the benefits of passive investing without addressing the risks. But just like active management, passive strategies require oversight and context .   Used appropriately, passive funds can form the core of a well-diversified portfolio and complement active strategies that seek alpha in less efficient markets or specialist sectors.   Final Thoughts: Financial Planning Comes First   Perhaps the most important point is this: passive investing is not a substitute for financial planning.   Platforms like Nutmeg, Vanguard and others have made low-cost investing  more accessible, but access is not advice. Building a portfolio is only one part of the puzzle. Clients still need guidance around tax planning, retirement income strategies, estate planning, and life goals.   The real debate shouldn't be active vs. passive, but rather how financial planning helps deliver the right outcomes for clients. In that context, both approaches can play a part. Passive investing is not “better”—it’s just different. And like any tool, it’s only effective when used well.

I recently came across a post on LinkedIn that struck a chord. It read: “I think X, and if you think Y, you’re an idiot.”   That sort of tone seems to be the norm these days — binary thinking, polarised views, and little room for nuance. It’s especially common in investment circles, where the debate between passive and active strategies  often descends into tribal loyalty rather than thoughtful discussion.   I’ll be upfront: My previous firm was built on a foundation of active investment management. We conducted deep research, carefully selected managers, and measured our performance against meaningful benchmarks. In many cases, we outperformed those benchmarks. But it wasn’t always perfect. We made mistakes, and success took time, effort, and continuous due diligence.   This experience taught me that true investment discipline doesn’t lie in choosing sides. Active and passive approaches don’t have to compete. Used thoughtfully, they can complement each other, often creating a stronger, more resilient portfolio.   The Case for Passive Investing   The arguments in favour of passive investing are well-established and consistent:   Consistent Underperformance of Active Managers   The S&P Dow Jones SPIVA reports (Standard & Poor’s Indices Versus Active) frequently show that most active fund managers fail to outperform their benchmarks  over long periods — particularly in large-cap developed markets  like the US and UK.   Over 10 years, over 85% of US large-cap active funds underperformed  the S&P 500 after fees. In the UK, around 75% of active UK equity funds  underperformed the S&P United Kingdom BMI over the same timeframe (SPIVA Europe Year-End 2023).   Lower Costs, Higher Net Returns   Passive funds tend to charge significantly lower fees  (often 0.05% to 0.30%) compared to active funds (0.75% or more). These cost savings compound over time and boost net returns , especially when performance differences are marginal.   Transparency and Predictability   Index strategies follow transparent, rules-based methodologies. Investors know what they’re getting — there’s no style drift , no star manager risk, and portfolio holdings are typically disclosed regularly . That’s reassuring for clients and planners alike.   But the Debate Isn’t That Simple   Despite the strength of the passive argument, it would be naive to assume it’s the right answer in every situation. Here’s why:   SPIVA Doesn’t Cover the Whole Picture   While SPIVA is valuable, it often reflects the most efficient markets  — where outperformance is hardest. But in less efficient areas  like:   Small and mid-sized companies Emerging markets Thematic and specialist sectors   Active managers have a greater chance to add value through research and selection.   A good example is the IA UK Smaller Companies sector , where the dispersion between top and bottom quartile managers is wide — and outperformance through skill is much more visible .   Risk Management and Capital Preservation   Passive funds generally track market capitalisation-weighted indices, meaning they automatically increase exposure to the most extensive, most expensive stocks  — often just as they peak. This creates concentration risk and, arguably, a self-reinforcing cycle .   SEI has noted that blind index investing can amplify market inefficiencies  during extremes and has highlighted the importance of tactical allocation  to manage downside risk.   Active managers can:   Reduce exposure to overvalued sectors Raise cash when risk signals increase Adjust positioning in real-time During periods of heightened volatility, such as Q1 2020 or 2022’s inflation-driven sell-off, a meaningful proportion of active funds outperformed . According to Morningstar, around 35% of active US equity funds outperformed the S&P 500  over a volatile 12-month period.   Diversification and Tactical Flexibility   Index strategies are inherently market-weighted , often leading to sector or regional concentration  (think tech in the US or oil and gas in the UK). Active managers, on the other hand, can diversify away from these biases — or lean into underrepresented areas .   A blended portfolio  benefits from both:   The broad exposure and low cost of index funds The selectivity and tactical agility of active funds   The Rub: It's Not About Sides — It's About Suitability   At the heart of all this isn’t the strategy—it’s the client and the environment we’re operating in.   Not all passive strategies are the same. Some are systematic , not strictly passive, with built-in factors or screens. Others are marketed as “index” funds but have active overlays .   Likewise, not all active managers are created equal — and few justify their fees without rigorous evidence.   The risk we face is that the industry—and the investor—chooses passive simply because it’s “easy” or feels safer. This could lead to a false sense of diversification  and long-term systemic vulnerabilities.   What’s needed instead is an open-minded, evidence-based approach  that combines:   Active management where it adds value Passive exposure where it makes sense Systematic strategies that bring precision Most of all, thorough research and ongoing oversight ensure everything is still doing its job.   Conclusion   There’s no right or wrong — only appropriate or inappropriate. A thoughtful mix of active and passive investments, tailored to client goals, risk profiles, and time horizons, can improve portfolio outcomes and reduce regret risk.   The key isn’t picking a side — it’s doing the work.

"Markets always go up." It’s a comforting phrase often used by investors to justify sticking to their strategy through turbulent times. But is it true?   In his latest annual letter, Larry Fink, CEO of BlackRock noted that the first stock exchange opened in Amsterdam in 1602. Fast-forward over 400 years, and according to Investopedia, there were around 80 major stock exchanges globally in 2023 , with millions of investors participating in financial markets daily.   We’re all familiar with the classic upward-sloping line in investment brochures – a visual shorthand for the long-term growth of markets. But history tells a more nuanced story.   A History of Stock Market Crashes   Markets don’t go up in a straight line. Over the past century, several dramatic market downturns have occurred. Here’s a reminder of some of the most significant crashes:   Wall Street Crash, 1929  – Between 1921 and 1929, the Dow Jones Industrial Average surged sixfold. But by 1933, it had lost nearly 90%  of its value from its peak. The Great Depression followed, lasting for years. The Kennedy Slide, 1962  – After a strong 27% rise in US markets during 1961, investors were stunned by a 5.7% drop in a single day in May 1962. Over the subsequent months, the market declined by more than  20% . Oil Crisis Bear Market, 1973–74  – Triggered by the OPEC oil embargo and high inflation, the S&P 500 fell 48%  in less than two years. Black Monday, 1987  – On 19 October 1987, the Dow Jones dropped 22.6% in a single trading day , the largest one-day percentage fall in its history. Dotcom Bubble, 2000–2002  – The Nasdaq Composite skyrocketed by over 400% between 1995 and 2000, only to fall by nearly 80%  by 2002 after the tech bubble burst. Global Financial Crisis, 2008–09  – At the depths of the crisis in March 2009, the Dow had fallen more than 50%  from its pre-recession highs. COVID-19 Crash, 2020  – Markets reacted sharply to the global pandemic. The S&P 500 fell 34%  in just over a month before an unprecedented rebound.   Other notable events not covered here include the Asian Financial Crisis of the 1990s, the aftermath of 9/11, and the 2018 Cryptocurrency Crash . Each of these periods brought uncertainty, fear, and significant losses for many investors.   The Dangers of Short-Term Thinking   Despite these crashes, markets have indeed recovered over time – and often gone on to reach new highs. However, the path is rarely smooth.   One striking shift in recent decades is the increase in the length of time investors hold onto their shares . In the 1950s, the average holding period for shares was around eight years . Today, it's closer to 5.5 months . That’s a massive reduction, reflecting not just technological change and easier access to trading platforms but also a cultural shift towards short-termism .   With this mindset, there is an implicit belief that we should only hold assets that are increasing in value. However, in doing so, investors often fall into the trap of performance chasing – selling underperforming assets too early and buying into winners too late. Moreover, if all the assets in your portfolio are highly correlated (moving up and down together), you’re likely exposing yourself to greater downside risk.   Evidence for Long-Term Growth   So, do markets always  go up?   The short answer is over the long term, yes – historically. But not without risk .   A chart from J.P. Morgan's Guide to the Markets clearly illustrates this point. Over one-year periods , the range of returns for US equities spans from a high of +61% to a low of -43 % . But over 20-year rolling periods , the range tightens significantly – between +18% and +4% annualised. This highlights the importance of time in the market  over trying to time the market.   Diversification also matters. Holding a well-blended mix of asset classes – equities, bonds, alternatives, and even cash – means you’re less reliant on a single part of the market. While it may mean forgoing some upside during market rallies, it can significantly mitigate the pain during downturns.   Key Takeaways for Investors   Markets are volatile in the short term , but history shows that long-term investors have been rewarded with positive returns. Short-term thinking is dangerous  – not just emotionally but financially. Constantly checking and reacting can often lead to poor decisions. Diversification is your friend  – a well-constructed portfolio that blends different assets and styles is more resilient. Know what you own and why  – understanding how your portfolio is designed can help build the confidence to stay the course.   Final Thoughts   Markets don’t always go up in the short term. They crash, correct, and recover – often dramatically. But over the long term, patient investors who avoid short-term knee-jerk reactions and focus on building diversified portfolios are far more likely to experience the benefits of compounding and capital growth.   So, the next time you see a chart with a nice upward slope, remember: the line only goes up because  it weathers the drops.

At QuantQual, we've been actively engaging with fund managers this quarter, introducing a range of strategies to enhance investment outcomes through our roadshows. We’re also preparing to release a series of short podcasts focusing on the use of alternatives in portfolio construction. This quarter's white paper explores a crucial topic: the power of blending .   The Rise of Index Funds and the Need for Ongoing Research   Index funds have experienced significant growth over the last 15 years, as highlighted by the Investment Company Institute’s 2024 Fact Book . While the rise of index investing has led to increased popularity, there's a common misconception that less research is necessary. It’s essential to remember that while investments are a critical part of the financial planning process, index investing still requires due diligence and thoughtful research .   Chasing Performance: The Risks of Overweighting the US Market   In recent years, some investment strategies have exhibited a pronounced skew towards the US market, resulting in strong performance. However, there are no guarantees this will continue in the future, and such strategies may increase risk for clients . Our white paper presents a balanced approach, combining various investment strategies to mitigate volatility and maximise returns.   The Benefits of Blending Investment Strategies   In our white paper, we explored the concept of blending investment strategies—combining the Magnificent Seven (top US stocks) , the Roaring Dragons (top UK stocks) , and the Granolas (European defensive leaders) . Over five years, this blend delivered a return of 21.71%  compared to 39.88% p.a.  with the Magnificent Seven, but with half the volatility . By blending these strategies, investors can achieve a more balanced return  while gaining exposure to cheaper segments of the market , which may outperform in different market conditions.   What Is Blending?   Blending involves combining different types of investments to create a diversified, robust portfolio. It's not about finding a group of funds that all deliver similar returns; instead, it’s about achieving optimal diversification across asset classes , geographies , and investment styles . Here are a few common blending strategies:   Passive vs Active Indexing : Traditional passive strategies track an index, whereas smart beta strategies adjust weightings based on factors such as value, momentum, or quality, potentially offering higher returns with lower risk. Active-Passive Pairing : A well-constructed portfolio may pair a broad global index fund (with a heavy US weighting) with an actively managed global strategy that seeks opportunities in underrepresented regions or sectors. Multi-Asset Investing : By incorporating fixed income , alternative investments , and factor-based equity strategies , investors can enhance resilience across various market conditions and smooth out portfolio performance.   Overcoming Behavioural Bias   Blending strategies also help mitigate the psychological traps investors often fall into. Behavioural bias  can influence investment decisions, leading us to seek evidence that confirms our existing beliefs. For example, many voices on platforms like LinkedIn claim that active management is dead ; however, blending strategies provide a way to separate from this noise and make more objective, data-driven decisions.   For more on this, listen to our podcast with Emma Mogford  from Premier Miton, where we discuss behavioural bias  and how to overcome it in investing.   Conclusion: The Future of Investing Lies in Blended Portfolios   In our white paper, we outline how blending can:   Enhance risk-adjusted returns Mitigate downside risk Diversify across asset classes , geographies, and investment styles Leverage AI & quantitative research  for smarter decision-making In short, the future of investing is about intelligent portfolio blending —combining the best of multiple strategies to optimise long-term outcomes. Read our white paper for more detailed insights on how blending can improve your investment strategy.

As I begin writing a new chapter in my upcoming book on the psychology of money , I find myself focusing on a critical theme: our relationship with money and the importance of controlling it—rather than letting it control us.   This chapter will examine the actual value of financial planning, a topic that has undergone significant evolution over time. In this blog, I’ll share some key insights that financial planners—and their clients—can use to understand better what planning means today.   What Is Financial Planning?   Historically, “financial planning” was often limited to product selection. You took out a pension, bought life insurance, or signed up for an endowment plan—with little clarity on whether it was the right fit or whether you were on track to meet your goals.   Over time, the focus shifted to investing. Financial planning became synonymous with portfolio performance. I helped build a successful business around that model—one that genuinely delivered above-market returns during my tenure.   But the world has moved on.   Today, financial planning is no longer about beating the market. It’s about understanding the person behind the money —their goals, challenges, and lifestyle—and building a long-term plan that supports them.   Is DIY Investing Cheaper?   DIY investing appeals to those focused purely on cost. It promises control and lower fees—but it also requires you to do everything yourself:   Develop your own financial plan Select the right investments Manage your future through every life stage   There’s ample research to show that we are not always the best decision-makers when it comes to money , especially when emotions, biases, or economic shocks are involved.   What Does a Financial Planner Provide?   It can be challenging to accurately articulate the value of financial planning. That’s why we encourage planners to create an Annual Fee Expectation Statement —a clear summary of what clients can expect in return for their ongoing fees.   Here are just a few of the tangible benefits clients receive:   Four Core Elements of Value:   Ongoing Expert Advice  – This is more than a one-time meeting; it's continuous, tailored financial support. Long-Term Security  – Strategies to grow, preserve, and transfer wealth across generations. Tax Efficiency & Risk Management  – Structuring finances to minimise tax and manage downside risk. Peace of Mind  – Confidence that professionals are looking after a client’s financial life.   What Else Is Covered by the Annual Review?   Regulatory Fees  – Supporting FCA-authorised and compliant services. Professional Indemnity Insurance  – Protecting both clients and the business from financial risk. Compliance & Reporting  – Ensuring advice meets regulatory and ethical standards. Technology & Security  – Robust systems that protect personal data and deliver modern advice. Holistic Financial Planning  – Covering pensions, tax, investments, protection, and estate planning. Retirement & Wealth Strategies  – Planning for financial independence and sustainable income. Unlimited Support  – Access to an adviser when needed — not just once a year. Market Monitoring & Updates  – Insights that keep the client informed in a changing world.   Conclusion: The Value of Advice Is Clearer Than Ever   At its core, financial planning is about improving lives, not just portfolios . It provides clarity, structure, and support in a complex financial landscape.   Whether you're a financial planner communicating your value or a client wondering what you're paying for—an Annual Fee Expectation Statement can be a powerful way to make that value visible.

Looking back, it’s incredible how quickly things can change. Think about the euphoria of the dot-com bubble, the crash that followed, and nearly three years of negative stock market returns. Then came the global financial crisis, reshaping economies for years. Events that feel fresh to some are already history for others—often forgotten in the rush of time. It has now been five years since COVID-19 shut down the world. Markets plummeted, then rebounded, shifting from growth to value investing. They faced setbacks in 2022 and 2023, alongside rising inflation, interest rates, and geopolitical crises in Ukraine and Gaza.   Yet today, despite these challenges, the markets have soared. The S&P 500 hit an all-time high of 6,129.58, after plunging to 2,237.40 in March 2020. The FTSE 100, once at 5,190, now sits at a record 8,700+.   The Rise of Index Strategies & Market Leadership   We've witnessed the dominance of passive investing , with active managers struggling—yet a handful of mega-cap stocks  in the US, Europe, and emerging markets  have driven substantial gains.   Lessons from Investing   One of the most valuable lessons I’ve learned is how to view investing over time . Imagine investing £100,000 , walking away for ten years , and returning to find £150,000 . You’d be happy. But we constantly check our investments in today’s 24/7 financial news cycle. Every short-term dip  feels like a loss, even if the overall value remains positive.   The past five years have reinforced a critical truth: Investing is a long-term game. Reacting to short-term market swings often leads to poor decisions.   The Challenge of Market Timing   Looking back to 2020, some trends were predictable. Certain stocks were hit hard, and their recovery seemed inevitable when a vaccine was introduced. But the timing was uncertain—when would the vaccine arrive, and when would these stocks bottom out?   Fast-forward to 2022 and 2023, and investor sentiment was near rock bottom. If you tracked market behaviour, you could see we were close to a turning point. However, when and where the recovery would happen remained unclear.   For nearly 12 months between 2022 and 2023, the S&P 500 barely moved. And now, as we look ahead, we face similar questions:   Key Market Questions for the Next 5 Years   Will index strategies continue to dominate, or is now the time for actively managed investments to shine? Will the same mega-cap stocks lead, or will markets broaden with a more diversified rally? Is the US overvalued? Are Europe and emerging markets offering better opportunities? Are investment trusts a hidden gem or a dying breed? Has Trump overplayed his hand? How will trade policies and global markets react?   Investing: Strategy vs. Speculation   Whether investing for ourselves or clients, we must remember that investing is not gambling .   If we believe we can consistently predict the market , we’re gambling. But if we accept that while markets are unpredictable , we can still find high-quality investments for long-term growth , then we are on the right path.   Summary: Where Are We Now?   Two key charts guide my thinking:   Investor Behavior —In September/October 2023, we were despondent. The historical trend was clear. Today, we’re shifting closer to euphoria . Fear & Greed Index : Twelve  months ago , we were in greed territory . Now, we’ve fallen into extreme fear . Markets move in cycles, and staying invested remains the best long-term strategy . The key is not trying to predict every twist and turn but staying focused, disciplined, and patient .

In a previous update, we highlighted concerns about the US's dominance within the MSCI World Index and the risks of being too heavily weighted toward US equities. These concerns remain relevant with Trump’s return to power, particularly given his high-stakes negotiation style and economic policies. Trump: Market Sentiment & Volatility   The Fear and Greed Index , a key measure of market sentiment, initially rose upon Trump’s re-election but has since declined and remains below 50. Market volatility remains a crucial factor, with the VIX Index —a standard market stability measure indicating potential turbulence ahead. US Trade & Economic Risks   The US economy remains deeply interconnected with global trade. Approximately 40% of US imports  come from Canada, China, and Mexico, while US exports total $2.1 trillion annually , with a similar percentage heading to these countries. The European Union accounts for another 17%  of US exports.   Trump's protectionist policies  could increase tariffs against the US, driving up prices and fuelling inflation. His push for US-based manufacturing may also disrupt global supply chains, creating uncertainty for businesses and investors.   What This Means for Markets   Increased Short-Term Volatility:  The VIX Index suggests that volatility below 20 is stable, while readings above 30 indicate heightened risk. Any sharp spikes should be closely monitored. Stock Market Strength:  A key indicator is the ratio of NYSE stocks hitting 52-week highs vs. those at 52-week lows —a critical measure of investor sentiment. Currently, this signals extreme fear in the market. Investment Strategy: Thinking Long-Term   Successful investing is about long-term growth (5–10 years), not short-term speculation . Trump’s policies could introduce uncertainty, but markets have historically adapted. While US equities remain overvalued compared to other global markets, timing an exit too early could mean missing key opportunities. Diversification remains essential to managing risk while capturing potential upside.   Bottom Line:  Trump’s return could drive market uncertainty, but investors should focus on long-term returns, sector strength, and geographical diversification  to navigate uncertainty. The question remains— who blinks first? Risk Warning: The value of investments can go down and up, and you may not get back the amount you initially invested. Past performance is not a reliable indicator of future results. Diversification does not guarantee a profit or protect against loss. Always seek professional financial advice tailored to your circumstances before making investment decisions.