The Importance of a Multi-Strategy Approach to Investing | Mission Wealth

[Music] hi I’m Karen Osborne Chief investment officer at Mission well and today I’ll be discussing the importance of a motorized strategy approach to investing which incorporates both active and passive strategies what is a multi-strategy approach when considering various investment options via funds exchange traded funds or other types of Investments most investment strategies fall into one of two buckets passive or active a passive strategy typically employs a low-cost approach to investing usually following an index or enhanced index methodology on the other hand an active approach to investing aims to utilize manager skill to outperform within certain areas of the market active funds tend to have higher expense ratios than passive funds to compensate for the additional layer of manager input and oversight [Music]

importantly we believe there is room within a portfolio for both active and passive funds and we believe incorporating both passive and active approaches where it makes sense May ultimately enhance the long-term returns of a broadly Diversified portfolio within highly efficient markets we employ passive strategies in the form of low-cost index Solutions U.S large cap stocks are a good example of a highly efficient market so why do we choose to invest in low-cost index-based strategies within us large cap well empirical evidence shows that on average active managers do not add any value within this asset class in fact over extended periods of time active managers on average have a very poor record as this chart illustrates between 80 and 90 of all actively managed funds underperform a passive Benchmark in this case the S P 500 over 5 10 and 15-year periods you can see similar results hold true for mid-cap and small cap US stocks taking the starter at best you have a 20 chance of picking an active manager who will outperform in the forthcoming oh and by the way there is no correlation between past performance and

future results in fact many of the best performers and one time period may end up being amongst the worst in subsequent time periods for this reason we believe in an index-based approach to investing within us large cap and other similarly highly efficient markets has a better chance of outperforming actively managed strategies so where to actively manage funds make sense within a portfolio We Believe less efficient asset classes such as high yield bonds Emerging Markets debt or direct credit are best suited to an actively managed fund approach think about the efficiency of an asset class this way if you asked any of your friends whether they have ever bought a stock almost all of them would reply yes however if you ask that same friend if they have ever bought a high yield Bond or an Emerging Market Bond the reply would be much different simply put hyoid bonds and Emerging Markets debt along with direct credit are all examples of much less liquid and therefore more inefficient asset classes we’re employing high quality active managers may add value as an example our preferred high yield Bond manager has

consistently outperformed more than 80 percent of peer group funds over extended periods We Believe utilizing a multi-strategy approach to investing incorporating both active and passive strategies and being thoughtful about which asset classes are best suited for each type of approach May ultimately enhance long-term expected returns within our clients broadly Diversified portfolios I’m Karen Osborne Chief investment officer at Mission wealth in this video discussed the importance of a multi-strategy approach to investing which incorporates both active and passive strategies for more information please visit missionwealth.com or contact your client advisor [Music]

thank you [Music]