Other common names for market timing include opportunistic investing, sector rotation, active asset allocation, top-down allocation, bottom-up allocation, global modeling, algorithmic positioning, defensive investing, and the list goes on.
For instance, a business that is managed by only one spouse is usually considered an active asset and would typically be valued as of the DOS (or commencement of the divorce action in New York).
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In essence, the judge could deem a normally active asset (the business) to be a passive asset and therefore would use the trial date as the valuation date rather than the DOS (or commencement of the divorce action in New York).
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There may also be little in the way of investment banking expertise that Lloyds can pick up from HBOS, even though the mortgage lender had been very active in trading asset-backed securities before being taken over by Lloyds last year.
In contrast, when an asset class does poorly, the active managers do better in that asset class.
While active investment involves an asset manager making investments with the aim of outperforming a benchmark index, passive investment requires an asset manager to replicate the benchmark index by incorporating the constituent assets in similar proportions (weights) and thereby matching the returns of the index.
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Asset managers earn a markedly higher advisory fee from active investment strategy and rightly so as active management relies on the skill of the asset manager which needs to be duly compensated with a higher advisory fee.
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Asset managers earn a markedly higher advisory fee from active investment strategy and rightly so, since given the relatively more trading of assets, active investing incurs higher transaction costs but more importantly because active management relies on the skill of the asset manager which needs to be duly compensated with a higher advisory fee.
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The data shows that active funds underperform without prejudice to asset classes, sector or style.
There is always debate among investors as to whether style investing using index funds or a style-based asset class fund is an active management strategy or a passive one.
Viewing the active versus passive debate by studying individual asset class comparisons is useful, but it misses an important dynamic that benefits portfolio returns that hold several different index funds representing multiple asset classes.
However, for now, the multi-asset strategy is clearly the domain of active managers.
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"Pre-Lehman, the focus was on asset allocation" and a diversified approach to active management, says London Business School professor Elroy Dimson, who is also head of the Strategy Council for the Norway fund.
Active versus passive return comparisons tend to be limited to the asset class level.
This passive asset allocation strategy has a long history of outperforming most active management strategies that try to time markets.
Under his concept, they would buy active ETF shares based on end-of-day net-asset-value prices the same arrangement used to price shares of regular mutual funds.
Most asset classes are available in an index fund or ETF so there is no need for active funds.
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