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. For the 2017 release of this document we have worked to expand our analysis and have dug deeper to test active universe qualities such as product persistency and universe stability through time. Even without skilled selection there are many cases where active management can help investors achieve better portfolio outcomes in risk and return terms.
- Better portfolio outcomes may come from additional return or lower risk. Not all investors have the same definition of better outcomes, and the trade-offs facing them vary by universe.
- Adding skilled selection to the process can add additional value in portfolio construction.
- 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.
- Fees remain an important part of the active management conversation. Fees and survivorship bias should be taken into account when analyzing active universes.
These improvements and insights have allowed us to better understand product behavior and may allow for more informed selection in the future. The Active Management Environment and more detailed information can be found by following the download link below.
We look forward to discussing this research with you.