Important information

The value of investments may fall as well as rise. You may not get back the full amount that you originally invested. Past performance is not a guide to future performance. There is no guarantee about the level of capital or income returns that will be generated.

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MATCH YOUR INVESTMENT APPROACH TO YOUR OBJECTIVES

The most important thing to consider when assessing your investment options is selecting styles which align to your charity's specific investment objectives and risk appetite.

WHAT IS AN ACTIVELY MANAGED FUND?

With an actively managed fund, the focus is on outperforming a specific benchmark, or index. Rather than investing in the same stocks that feature in that index, active managers scrutinise company, industry and market developments (such as earnings reports, new product launches and political events) to identify stocks with the greatest potential to generate a profit.

They can also adjust the structure of their investment portfolios to include different asset classes and sectors based on what their research reveals.

THE PROS AND CONS OF ACTIVELY MANAGED FUNDS

Actively managed funds are typically more volatile, so may be better suited to investors with a higher tolerance of risk. Conversely, these funds often have greater potential for opportunity for profit than their passively managed peers.

Many active funds aim to generate big gains quickly, which means they can have a hefty exposure to volatile stocks and low-rated bonds - exposure that increases the odds of both profit and loss. It's also important to recognise that the higher fees that usually come with active management can make a significant dent in profits.

WHAT IS A PASSIVELY MANAGED FUND?

A passively managed fund aims to achieve the same returns as a specific benchmark, rather than outperforming it. Index funds are one type of passively managed fund that invests in the exact same stocks or bonds that appear in the index. An index fund based on the S&P 500, therefore, typically owns all the stocks listed on that index.

THE PROS AND CONS OF PASSIVELY MANAGED FUNDS

Passively managed funds tend to be a lower-risk investment option than actively managed funds, although returns are usually slower to materialise in comparison.

Because a low number of trades are carried out each year, passively managed funds typically have lower fees. But when it comes to index funds, don't forget that the fund matches the performance of the index - in good times and in bad - so passive funds can really suffer when the market suffers.

BENEFIT FROM THE BEST OF BOTH WORLDS

So should you opt for the lower fees, lower risk and lower returns that typically come with passively managed funds? Or should you strive for the best return on your investments by taking on higher fees and higher risks in exchange for the higher-return potential of actively managed funds? The good news is that you don't have to choose one or the other - you can combine the two approaches by investing with a multi-manager.

MULTI-MANAGERS COMBINE BOTH INVESTMENT STYLES

Managed by abrdn, the Disrectionary Portfolio Management service is underpinned by funds that bring together the best of active and passive investment approaches.  

abrdn focus on identifying managers with the experience, investment knowledge and stock selection skills that give them the potential to deliver consistent outperformance over time, across a range of market and economic conditions.

Learn more about Discretionary Portfolio Management

Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested.  There is no guarantee about the level of capital or income returns that will be generated. Past performance is not a guide to future results.