Andrew Clee: How and Why Active and Passive belong together in a Portfolio

October 16, 2018

2 minute read

We talked with Andrew Clee, CFA, CMT, Vice President, Fidelity Investments Canada about the Active/Passive investing debate, as well his company's recent launch of a timely new suite of Dividend Factor ETFs and Funds.

There's been way too much time spent on the general debate, and we talked about some very important points that get lost in the shuffle of the active/passive debate.

The industry has done a lot of work of putting active management against passive management, and creating them as enemies," says Clee. "We've seen a lot of media headlines, 'Passive has outperformed Active,' 'ETFs are taking over the market.'

"I view them as complementary tools. If I was a plumber, I'd want every single tool in my tool box, I wouldn't want to be stuck to one sort of tool, because at the end of the day, you don't want to fit a square peg in a round hole," explains Clee.

"We've seen over the past decade or so, that investors are actually using both, so I don't like to say that ETFs are for one kind of investor, and a Mutual Fund of bottom up picking investors are fit for another, said Clee. "I think they're actually very complementary."

"ETFs, they tend to be very diversified, so you see larger stock holdings, on the aggregate. What you see there is an increase in beta, a little more sensitivity to market swings. They also tend to be fully invested, so that's how we've seen that upside participation in bull markets."

"Then take an active mutual fund, so bottom up stock selection – those are the guys qualified to say one stock should be overweight relative to another, or one stock is a better play than another (in any given sector)," explains Clee. They're in a position to make those decisions, they also have the ability to raise cash. When we talk about downside protection, when you look across the Fidelity lineup, we have a very good history of downside protection, so when you marry the two products together, you're just expanding your toolkit."

In this segment, Andrew Clee talks about Fidelity's new suite of Dividend Factor ETFs, and how a targeted approach that gives high yield in a diversified manner, and the combination of lower management fees, is a compelling mix for investors.