Tactical allocation: the cherry on the cream cake

Article by Dr. Christian Jasperneite

For years, a comparatively fierce dispute has been raging between supporters of passive and active investment approaches. Supporters of active approaches point out, not without justification, that passive and largely static portfolio structures by definition do not allow for tactical allocation, although it is precisely here that added value 
could be generated in the long term by varying the quotas of asset classes, countries or sectors.

But how great is the potential of tactical allocation if the alternative would be to simply leave asset class weights static at benchmark levels? We have tried to answer this question against the background of the almost legendary “Fundamental Law ofActive Management”.