Danger: Don’t Judge A Fund By Its Active/Passive Label
401k SpecialistMay 21, 2018
Contrary to the beliefs of (too) many advisors, selecting funds for a fiduciary account based solely on their active or passive management style is not prudent.
In a February 2018 Fi360 blog post, “Do Bad Index Funds Exist,” Mike Limbacher noted that 17.3 percent of index funds scored in the fourth quartile of Fi360’s Q4 2017 Fiduciary Score rankings.
While this is better than the 25 percent expected in the fourth quartile all else equal, it shows that using “passive” alone as selection criteria is far from a fail-safe choice.
