Active, passive or hybrid mandates are implemented to achieve the identified investment objective considering the governance budget, investment beliefs and investment efficiency.
Guideline code
INVEST_02000
Mechanism
Mechanism
- The management or investment committee should seek to gain access to the desired risk and return combinations using the most efficient and lowest cost investment mandates available.
- Passive mandates should be used where appropriate to achieve market performance. For example, a passive mandate may be the most cost-efficient and accurate way to achieve the performance of a widely known equity index. These mandates tend to have lower fees and offer greater liquidity.
- More sophisticated passive or hybrid mandates should be used to achieve the risk and return characteristics from less liquid areas or factor-driven portfolios which have attractive risk–return characteristics, such as fundamentally weighted equity indices. These mandates tend to have higher fees than passive mandates and may be less liquid depending on the asset class being accessed. More governance budget may be required to monitor and adequately assess whether these mandates are responding to the desired return and risk attributes.
- Active mandates should be used to access investment manager skill in addition to market performance. These mandates tend to have higher fees than hybrid mandates. Liquidity will be determined by the types of underlying investments the manager skill is being used to access. A higher governance budget may be required to monitor and adequately assess whether these mandates are responding to the desired return and risk attributes.
- Where the board, management or investment committee lacks sufficient resource, expertise or governance budget to determine appropriate use of active, passive and hybrid mandates, the board, or the management or investment committee with board authorization, should seek expert advice or appoint external professionals to carry out these functions.
Parent
Structure
Structure
- The management or investment committee should use active, passive or hybrid management of investments according to the investment mission, goals and investment beliefs approved by the board.
- The management or investment committee should seek to populate the portfolio using the most efficient investments available which demonstrate the required return and risk attributes.
Title HTML
Guideline 17. Use of active, passive and hybrid management
Type
Guideline_1
Weight
24