Passive funds require robust due diligence

The asset management firm says there is an assumption that indexed investment vehicles only involve the beta risk of the markets they track, which is not the case. TCF Investment joint founder and CEO Gary Mairs says there are five key areas, aside from costs and total expense ratios, which advisers need to check before investing. These comprise index suitability, stock lending, vehicle structure, engineering and tax. The first step is for advisers and investors to understand the characteristics of the underlying index being tracked, and how the ETF mirrors the index. For example, the...