Passive-only fund of funds outperform active counterparts - Morningstar

Fees play a big part

David Brenchley
Fund of funds come out better on a risk-adjusted basis

Fund of funds come out better on a risk-adjusted basis

Fund of fund strategies investing only in index or smart-beta instruments have performed better than those investing only, or mainly, in active funds over the past five years, research from Morningstar shows.

In absolute terms, across six different investment categories, where there were passive-only fund of funds, Morningstar's data showed the passive-only option outperformed their counterparts investing in a blend of styles or active only each time. In Morningstar's GBP Moderate Allocation category, for instance, fund of funds investing only in index or smart beta funds returned just over 4% in annualised terms over five years. For those investing in a blended strategy or in active only, that return was under 3%. 'Draconian' FCA open-ended property fund measures expected to drive flow...

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