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Want Transparency When Investing? Opt for Passive Funds

By virtue of simply tracking an index, passive fund managers are not under pressure to keep information on fund holdings away from public eyes. There is nothing to hide

Investing is all about taking risks on the expectation of a return. By nature it is an activity fraught with uncertainty and investors have little option but to accept the unpredictability of returns. We are constantly reminded that past performance is not a guide for the future, however investors can take steps to minimise the ignorance of the risks assumed.

The growing popularity of passive investing over the last decade has been partly predicated on the high level of transparency associated with the management of passive funds compared to the active side of the industry.

Passive funds, particularly so exchange traded funds (ETFs), have been the subject of close scrutiny by regulatory bodies, international research bodies and media commentators. The passive industry’s response to this scrutiny has been one of maximising transparency in all aspects relating to the management of the funds, including comprehensive, regularly updated and, more important, easily accessible information of fund components.

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About Author

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure

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