A new reality for investors
Under the stable, low interest rate environment of recent years, passive investing has been championed as a cost-effective way to track market returns. However, in an increasingly unpredictable and volatile global economy, shaped by inflationary shifts, geopolitical tensions and rapid sectoral and technological evolution, relying on index-based, passive strategies alone is not an option. The ability to adapt has never been more important.
Global growth is expected to reach 3% in 2025, but this expansion is largely uneven. While the U.S. is projected to grow by 1.9% and the eurozone by just 1.2%, India is forecasted to expand at an impressive 6.5% (mifl.ie/market-outlook). These discrepancies highlight the risks of a passive, index-tracking approach, which cannot adjust to regional economic variations or sudden market shocks.
Today’s investors need more than just broad diversification – they need a framework that allows for proactive risk management and dynamic allocation. A multi-manager approach achieves this by integrating different investment styles and leveraging the expertise of top-tier fund managers across multiple asset classes and geographies. This ensures that portfolios are not reliant on a single investment philosophy, enhancing resilience and improving long-term performance.
Beyond passive investing: when active management delivers the best outcomes for the investors
The notion that passive investing through digital platforms should be preferred due to ease of access and low costs, overlooks a crucial reality: self-service access and cost alone does not dictate investor success—investor behavior does. A low-cost strategy that merely tracks an index does not necessarily ensure optimal results, particularly in volatile or uncertain market conditions where emotions drive decisions. Passive investors remain vulnerable to structural shifts. True success lies in investing methods that eliminate the investors’ emotional biases and by investing in solutions that are flexible. Through active management, investors can avoid overexposure to weakening sectors while identifying stronger growth opportunities.
An analysis using data from the Evestment platform data demonstrated that over a ten-year horizon more than half of fund managers outperform their benchmarks and the market. This figure increased to over 80% in European equity funds, emerging markets and Asia ex-Japan. The ability to select and combine the best performing active managers allows investors to capture highly attractive excess returns – something that passive strategies simply cannot offer.
At Mediolanum, we believe that the best outcomes are achieved through combining optimal investment horizons with an active multi-manager approach. This strategy enhances portfolio resilience by diversifying across managers with varied specialisations, ensuring that investments are not confined to a single style or market trend.
The ability to draw on sector-specific expertise is a key advantage as portfolio managers with deep knowledge of particular regions or asset classes can identify mispriced opportunities and generate superior
returns following different investment processes. This dynamic and flexible approach ensures that capital is deployed efficiently, mitigating risk and optimising long-term outcome with different market conditions.
Innovating with the specialists
One of the greatest strengths of our multi-manager model is its ability to provide retail investors with access to innovative boutique investment firms alongside larger institutional managers. While larger firms offer scale and market reach, boutique managers bring agility, high-conviction strategies and deep specialisation.
Boutiques typically focus on higher-risk asset classes such as equities and credit. Very often they exploit market opportunities that cannot always be pursued at scale. These managers thrive also with lower total AuM by investing in areas less attractive to large firms, which generally prioritise high-capacity strategies. For example, boutiques’ ability to take an active, high-conviction approach with concentrated portfolios makes them particularly valuable during periods of heightened volatility.
At the heart of the boutique mindset is a commitment to quality performance and long-term relationships over short-term AuM growth. Key staff, often shareholders, operate like entrepreneurs, prioritising long-term value rather than short-term targets. This entrepreneurial mindset, coupled with their smaller size, allows boutiques to make swift business decisions, free from the bureaucratic constraints that often hinder larger firms.
“Key staff, often shareholders, operate like entrepreneurs, prioritising long-term value rather than short-term targets.” – Furio Pietribiasi, CEO, Mediolanum International Funds Limited
Investor behaviour and the importance of professional advice
Beyond market conditions and solutions, investor behavior plays a pivotal role in financial outcomes. Studies have consistently shown that market timing decisions systematically erode returns. For example, in 2023 Dalbar reported that a $100,000 investment in U.S. equity funds, would have yielded over $26,000 in gains. However, most investors who attempted to time the market achieved just over $20,000, losing out on a potential further $6,000 of returns.
Over longer periods, this behavioral gap becomes even more pronounced. A $100,000 investment made in 2004 and held in U.S. equity funds for 20 years would have grown to over $636,000. Yet, investors only managed to secure about half of this, with an average gain of $295,000. This was because of emotional decision-making — selling during market downturns and buying when markets recovered, resulting in poor market timing.
This highlights why active management alone is not sufficient. Without professional financial advisors who educate their clients and provide adequate financial planning with the right investment solutions and time horizons, long-term success remains elusive. This underscores the importance of investor education and professional financial advice, both of which are integral to the Mediolanum investment philosophy and the systematic investment services embedded in our products.
Conclusion
In this challenging environment, we must offer investors solutions that not only diversify risk but also seize opportunities in regions and sectors poised for growth. As we look ahead, markets no longer follow predictable cycles. The ability to pivot—whether in response to policy changes, sectoral shifts or global economic trends—will be crucial for long-term performance.
For retail investors, who often make decisions driven by emotion rather than rationality and lack the technical depth to fully understand the risks, the active multi-manager approach is not just an alternative to passive investing—it’s the future of adaptive, risk-aware investment strategy. This approach mitigates the risk of negative surprises and misunderstandings, ensuring a more resilient investment journey.
