Asset Management: Active vs. Passive
SWIB has long been considered a low-cost pension fund manager that provides solid returns for the WRS. SWIB is able to manage its costs effectively and provide respectable returns by combining active and passive management of the trust funds.
SWIB is able to manage its costs effectively and provide respectable returns by combining active and passive management of the trust funds.
What is Active & Passive Management
Active management refers to a portfolio management strategy where the manager makes specific investments using analytical research, forecasts, and his or her own judgement and experience with the goal of outperforming similar investments in the market.
Passive management, also known as "indexing," is a style of management that attempts to match the results of a basket of investments such as the S&P 500. Passive management strives to equal what the market delivers at a lower cost while active management works to beat the market returns.
How Does SWIB Use Active & Passive Management
SWIB uses a combination of active and passive management not only to earn above market returns, but to manage risk and protect the trust funds from market volatility. The combination of active and passive management has been very important to SWIB's investment strategy, especially with the market ups and downs experienced recently.
SWIB has always used a mix of both active and passive management. The mix of active and passive management varies by asset class and depends on market efficiencies and management options. Some markets SWIB invests in to help diversity the Core Fund, such as private equity and real estate, do not have passive indexes. By actively managing assets and putting place those diversification strategies, SWIB works to stabilize returns, contribution rates, and annuity adjustments. As a result, this directly impacts participants and employers.