or… why there is nothing passive about managing a passive fund!
Passive investment has become increasingly popular over recent years as risk budget allocations, active performance outcomes and overall portfolio costs have all come under increased focus. While passive investment strategies do not seek to add value through deliberate skewing of the aggregate risk profile of a portfolio against its benchmark (eg duration, curve and aggregate credit risks), there are still a number of conscious decisions that need to be made in order to deliver index-like returns in the most efficient way.
In theory passive investment strategies that fully replicate a given benchmark, mirroring all asset holdings and the timing of any index changes, should be relatively simple. In practice, they are anything but for a variety of reasons.
