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Understanding Active vs. Passive Management

When the economy is humming along and the financial markets are doing well, a traditional investment portfolio of stocks and fixed income performs nicely.  Over the long haul, this has been a successful strategy for investors who can patiently ride out market gyrations.  Our passive management offering is a way to participate in the financial markets in a maximally efficient way—and help our clients keep more of their own money in their own pockets.


In tougher, more volatile markets, it can be nice to have a strategy that can still do well. Our actively managed account offering is an attempt to generate positive returns in a wide range of market conditions using complex trading strategies that are not correlated to a traditional portfolio.  Sam Benen’s hedge fund trading expertise is fully implemented in the strategies we use for our actively managed client accounts. Our active management strategies involve options, short-selling, relative value fixed income trading, and hedging. 


SIDE-BY-SIDE COMPARISON: ACTIVE VS. PASSIVE MANAGEMENT

Passive ManagementActive Management
What type of investor is this for?Investors seeking to grow their assets in financial markets over the long haul who are comfortable riding out big near-term market swings.High-net-worth, sophisticated investors who are seeking respectable, stock-market-like returns from alternative strategies, while minimizing portfolio volatility.
What service is SJBenen providing?Our expertise in constructing an ultra-efficient portfolio that matches our clients’ investment objectives while minimizing costs.We are actively managing risk, monitoring financial markets, and implementing complex trades in pursuit of positive returns regardless of market direction.
What are the main risks?The future performance of the broad-market stock market averages and the future path of interest rates, which are inherently uncertain.The success or failure of specific trading strategies implemented by SJBenen. Our clients are depending heavily on our decision-making and trading prowess.
What is our value-add proposition?Giving our clients access to a traditionally advised portfolio at a fraction of the cost using the smartest investment vehicles—this benefits clients’ long-term bottom line.Giving our clients access to a hedge fund strategy without the usual pitfalls of investing in hedge funds: exorbitant fees, lack of transparency, inability to get your money back if need be, and moral hazard.


Our active management offering is about mitigating risk, using tactical asset allocation, and implementing complex trading strategies to edge out a respectable return that is uncorrelated to the overall market.  While most investors would likely do just fine in a passively managed strategy over the long haul, active management can be a useful diversifying tool.Active management is not a magic elixir or a silver bullet; there are no guarantees of a higher return or lower risk.We simply think that it’s valuable and worthwhile to be able to meet return targets for our clients’ portfolios while also limiting risk and using strategies that don’t necessarily correlate to traditional investments.

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