Index funds and the adviser alpha model offer more protection against active losses

Index funds will play an increasing role in investor's portfolios as advisers reject the risk associated with seeking pure outperformance, Vanguard's Francis Kinniry says.

Speaking at the firm’s Investment Symposium last week, Kinniry said the traditional approach of adding value by attempting to outperform a benchmark is changing. He says the use of index funds and the growth of “adviser alpha” are more effective ways to meet investors’ needs and protect them from active management losses. “No strategy works consistently year over year, and it is during those periods where a strategy is out of favour where clients may not appreciate the long-term track record,” Kinniry says. “This is where indexing can help. Combining index and active strategies mai...