Question

why is a fixed income bond fund and a non-US small-cap fund better suited for active managment?

please provide insight

Answer 1

Fixed income fund and Non United State small cap fund will be better suited for active management because active management does not mean that only volatile stocks are to be taken in order to beat the rate of return of market but it will also mean that these stocks are to be added into the portfolio which will provide the portfolio with an additional edge in relation to the market.

Fixed income Bond can be better suited for active management at the time of economic recession and it will be reflecting a diversification in the portfolio and when the the economy will be on a continuous downslide then these type of fixed income securities will be outperforming the other stock funds, and it can be said that it is a type of active fun at those times as it can easily with the market rate of return of the stock funds are highly volatile and they have a high correlation with the market, whereas these fixed-income securities will be having a very low correlation with the market and their rate of return will be uniform in nature irrespective of these market recessionary periods.

Non-United States small cap fund will be reflecting that we are interested into very high volatile securities in the emerging markets which are small cap fund and they will be having a very high correlation with respect to the Global growth rate and they will be outperforming the markets on the upside in a bull run because these companies will be generally growing on a very lower base and they have a size effect attached to them and they can acquire large market share so active management in case of markets are going up will be outperforming the other strategies when investing into a non United State small cap fund.