Our Approach compared to Active Management and Traditional Indexing:
Ancona Financial's Passive Asset Class
Approach:
- Grounded in capital markets reality and common sense (The riskier
the company, the higher expected return it must offer to attract
investors.)
- Academic research identifies specific categories of risk (size,
market, style) in portfolios that determine expected returns.
- Company engineers funds that statistically replicate the risks
and expected returns of owning an entire asset class (e.g., of
owning all small caps.)
- These passive Asset Class funds are efficient building blocks
of a portfolio, minimizing trading costs and enhancing returns.
Active Management:
- Attempts to beat the market through security selection
and market timing
- Undermines asset class exposure to keep up with most "promising"
securities
- Generates higher fees, trading costs, and tax consequences
due to increased turnover
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Passive/Index Management:
- Accepts index returns and risks
- Allows benchmarks designed for marketing to define strategies
- Reduces return by transaction costs and turnover in order
to track index
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