Index Tracking and Active Investment

ETFs seek to match the performance of an index. This means they can operate with a much lower cost structure than that of actively managed funds, which charge higher fees for the possibility, if not the certainty, of outperforming the market.

There is a big difference in the results of the best- and worst- performing asset managers. Making the right choice and choosing the best-performing asset managers among various asset classes is a big challenge. Most alpha strategies depend on expert knowledge and specialized resources in a particular market segment. The task of building a portfolio with the best-performing asset managers is attractive, but difficult to carry out. The regular and reference performance generated by ETFs, with low costs, can be difficult to carry out. The regular reference performance generated by ETFs, with low costs, can be effective portfolio development tools for managers with strong convictions regarding active management.

It should be noted that both indexed and active management have their advantages. In many cases, the best choice is a combination of both.