FYI: The often-touted fact that the “average” active manager routinely underperforms the index has encouraged investors to embrace passive investing over the last decade. In many asset classes, like large-cap U.S. equities, this has proven to be a lucrative strategy. Investors gain exposure to an underlying asset class while incurring much lower costs. The problem, of course, is that this “one size fits all” passive investment strategy does not work equally well across all asset classes.
Fixed income markets are a good case in point, particularly the high yield bond and senior secured loan markets. For a variety of reasons, three of which we set out below, these markets are less efficient, meaning that nimble, active management has resulted in excess returns for investors, above and beyond what passive strategies have been able to achieve. Let’s take a look at three reasons why investors may want to consider an active approach to these markets:
Regards,
Ted
http://www.barrons.com/articles/sponsored/nativo?prx_t=ncoCA2PAPA8SUQA
