It’s difficult to approach the topic of passive investing without acknowledging one’s own inherent bias. After all, careers have been built on the premise that active investing adds value. No matter how much we try and attempt to set biases aside – your author know they are unlikely to succeed.

The past couple of years have been challenging for domestic bond investors. The Bloomberg NZ Bond Composite 0+ Yr Index declined approximately 6% in 2021 and 7% in 2022. However, in 2024, declining interest rates led to a strong recovery in bond returns, reaffirming the importance of bonds in a well-diversified portfolio.

Many market commentators have written about strategic asset allocation previously – the investment science behind the long- term allocation of investors’ capital across various asset classes.  In our view, strategic asset allocation (SAA) is one of, if not the most important decision an investor can make when developing a portfolio of investments.

Why so volatile?

This year, over 4 billion people are voting to shape their country’s political and economic outlook for the next three to five years. From India to France, Mexico to the UK numerous general elections are taking place.

The momentum run in the US market continues to be very strong. It resembles in many ways the peak rally in 1999 to early 2000, just before the “dot com” crash.

Investment markets are forward looking.

Octagon looks to enhance the returns for our customers by being an active manager in the markets we invest in. This means, by definition and style, we are not passive investors who simply buy the index or the sector, rather we apply a disciplined process that allows the Octagon portfolio managers to identify when and why an asset is mispriced, and take advantage for our clients.

Octagon Asset Management (Octagon) as an active investment manager and we aim to deliver superior investment returns by being active (as opposed to passive).