Speaker Q&A

Antonello Russo

Director - Risk and Quantitative Analysis Group
BLACKROCK

The views and opinions expressed in these answers are those of Mr. Antonello Russo and do not reflect the official position of his employer, BlackRock.

 

What are the key factors to consider when choosing between an active and a passive investment strategy?

The distinction between active and index strategies is regularly presented in clear-cut terms, and it is in a way a useful simplification. The investment landscape is more heterogeneous though: in my opinion active and index strategies should not be presented as opposites or mutually exclusive: while certain index strategies are designed to track well-established, broad, market-cap weighted benchmarks, others are built around investment themes or skewed towards specific factors, and aim to achieve similar investment objectives as active ones, although through different methods. In addition to this, index instruments can themselves be actively traded by investors, contributing to price discovery and expressing investors sentiment.

In general, the factors behind any investment decision need to reflect, in the case of index portfolios, a belief in the asset class, market and methodology represented by the index which the strategy is designed to track, and in the case of active ones, confidence in the portfolio manager's skills, investment process or alpha signals generation.

What side of the fence are you on?

I believe there is no opposition between passive - or rather index-tracking - or active strategies. Both investment approaches are complementary to each other rather than being mutually exclusive.

How do you expect the future to be? Will the relation between active and passive change?

I expect index-tracking and active strategies to continue coexisting, and investors to use a combination of investment strategies to pursue their goals, spanning exchange traded and index funds, active and absolute return strategies, as well as single securities.