Ours is a wonderful industry for using terminology that confuses the professionals let alone the customers. You know what I mean, basis points instead of per centages, asset managers instead of fund managers and my favourite, government paper for Gilts. We regularly hear the phrase “Passive investment”. You might think you know what it means. Experience over hundreds of interviews tells me I do not. Does it matter? Yes, it probably does. We need to be clear what we are telling our customers.
So what do we mean when we use the term ‘passive’ as an investment methodology? The typical answer is along the lines of, “We don’t believe active managers add value, so we invest in passive funds.”
For the rest of this article go to: http://www.adviserlounge.co.uk/2015/05/12/can-someone-tell-me-what-passive-investment-means-and-other-dumb-questions/