WEBVTT - Quick bite: How diversified funds blur the active & passive line 

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<v Speaker 1>You're listening to a Shasise podcast. One thing I think

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<v Speaker 1>that we think about when we think about active and

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<v Speaker 1>passive is and this is why I continue to talk

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<v Speaker 1>about index tracking, because if there's an index in a market,

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<v Speaker 1>then that's what you're doing. In a passive fund, that's

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<v Speaker 1>your job right to replicate. In mirror key, we Savor

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<v Speaker 1>in New Zealand has really grown this area of interest

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<v Speaker 1>in a diversified fund, so that has broad in new complexity.

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<v Speaker 1>When you get into a diversified fund, anybody, regardless of

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<v Speaker 1>whether you're using index tracking, building blocks or stock selection,

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<v Speaker 1>you're making a active choice on how you build that

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<v Speaker 1>diversified fund. And so that's where the line I think

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<v Speaker 1>that blurs between passive and active. So, yes, it's smart.

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<v Speaker 1>Do we have a bunch of index tracking etips? Absolutely

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<v Speaker 1>we do. Do we also under the super Life brand

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<v Speaker 1>that we're going to change to Smart, have diversified fund

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<v Speaker 1>We have those two. You need extra acid allocation expertise

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<v Speaker 1>to go into that, so give you a little bit

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<v Speaker 1>more color, give you a little bit cost as well

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<v Speaker 1>from the sound of it too. Absolutely, but that's where

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<v Speaker 1>you get the extra expertise. So we talk about how

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<v Speaker 1>risk tolerant. Are you you might be conservative or balanced

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<v Speaker 1>or growth. With that becomes a pretty global standard way

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<v Speaker 1>of thinking how you spread your assets for that. So

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<v Speaker 1>a balance portfolio pretty traditionally is sixty percent in equities

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<v Speaker 1>which are called growth assets, forty percent in bonds or

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<v Speaker 1>fixed income or defensive stable assets. That's the worldwide acknowledged.

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<v Speaker 1>You can chat GPT that and will tell you what

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<v Speaker 1>your standard asset allocation is. Right. So from there, right,

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<v Speaker 1>we've started at the top. We've got some growth, some stability.

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<v Speaker 1>That's the balance. But underneath that you've got asset categories.

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<v Speaker 1>You've got New Zealand equities, Australian equities, International, the Europe.

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<v Speaker 1>You've got fixed income which comes into your stable. You've

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<v Speaker 1>also got cash and increasingly you've got alternative assets, so

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<v Speaker 1>you have to look at those in that. You've got commodities.

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<v Speaker 1>We've talked about gold before as a great diversifier. You've

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<v Speaker 1>got property that's become listed properly, become really popular and

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<v Speaker 1>far more standard in terms of that. So you've got

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<v Speaker 1>asset categories. Then what you do as a fund manager

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<v Speaker 1>and say, right, well, if those are the core ingredients,

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<v Speaker 1>what's my strategic acid allocation. So when I break down

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<v Speaker 1>the sixty forty, how do I make that up? And

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<v Speaker 1>in that zone, we're all making a decision about where

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<v Speaker 1>our target waiting is in any of those asset categories

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<v Speaker 1>and what our range is. So you set that'll be

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<v Speaker 1>in the SIPO and that's what you're set with. But

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<v Speaker 1>then within that you have tactical plays. So even though

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<v Speaker 1>you might be labeled a passive fund manager, when you're

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<v Speaker 1>buying a diversified fund that's growth or balanced, we're all

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<v Speaker 1>making conscious choices around acid allocation. So here it's smart.

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<v Speaker 1>When we choose our diversified fund, we will build that

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<v Speaker 1>up with index tracking building blocks because we think that

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<v Speaker 1>those are tracking the market and are a good lower

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<v Speaker 1>cost alternative. So that's how we build it. But we

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<v Speaker 1>still need to put that together and know how our

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<v Speaker 1>acid l cation looks. If you're an active fund manager,

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<v Speaker 1>you've got the same acid allocation that you're working on,

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<v Speaker 1>but at the lower level of fund you might choose

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<v Speaker 1>instead of having index tracking funds, you might choose to

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<v Speaker 1>build it up via active stock selection, so you're picking

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<v Speaker 1>individual names, individual companies to build, which is a little

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<v Speaker 1>bit more intensive, but potentially gives you exposure to greater

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<v Speaker 1>greater gain, but greater losses. Well yeah, and so there's

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<v Speaker 1>a whole lot more onus there on doing the research,

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<v Speaker 1>finding the right companies and doing that. The tricky thing

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<v Speaker 1>for investors, I think with the diversified fund is there's

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<v Speaker 1>no easy benchmark or index. So there's no global New

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<v Speaker 1>Zealand based investor balanced risk profile, there's no index for that.

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<v Speaker 1>So it's really hard to compare the performance of our

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<v Speaker 1>diversified funds. And that's why it comes into league tables

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<v Speaker 1>and why people constantly talk in that space around as

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<v Speaker 1>your fund performing in the top quart aisle or not,

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<v Speaker 1>and where does it rank versus its peers. But we're

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<v Speaker 1>all going to be slightly different in our acid allocation

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<v Speaker 1>that we've employed and the width of our ranges and

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<v Speaker 1>where we can tactically tilt given market conditions. So we

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<v Speaker 1>might hold more in cash right now, less in international equities,

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<v Speaker 1>and we can do that because that's within an acid

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<v Speaker 1>allocation guideline rather than very specifically having to track to

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<v Speaker 1>there's no global common standard of what a diversified fund

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<v Speaker 1>should look like. Investing involves risk. You might lose the

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<v Speaker 1>money you start with we recommend talking to a licensed

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<v Speaker 1>financial advisor. We also recommend reading product disclosure documents before

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<v Speaker 1>deciding to invest