Verus is excited to announce the release of the 2016 Active Management Environment. Our work in this space continues to help address some of the shortfalls of traditional active management analysis, which uses the median manager to describe the active management universe as a whole. These new insights have allowed for a better understanding of the range of impacts that active management can have on portfolio outcomes.
This report uses newly developed analytical tools which provide significantly more detailed information about the behavior of manager universes, and allows for an in-depth look into the following key features of the active management marketplace:
- Active managers within each asset class are characterized by a wide range of risk and return results, many of which are very different from the benchmark and median manager. This suggests using the benchmark and median manager as proxies for the universe may be an overly-simplistic and inappropriate approach.
- Investors would typically expect increased risk to be compensated by increased return. In reality there is good evidence that in many asset classes increased risk is not compensated by greater return – while reduced risk may be achievable without sacrificing return
- These risk/return anomalies provide ample opportunity for active managers to add value, as long as the decision to use active management is made in a considered, evidence-based fashion.
- Investor needs and goals should always be the starting point for deciding whether to use active or passive management approaches. The deeper insight contained in this report provides tools for consultants and investors to ensure closer alignment between investor goals and active management opportunities.
We look forward to discussing this research with you.