In the 2018 Active Management Environment we continued to work towards a more comprehensive understanding of active manager behavior, and ways of using this knowledge to improve investment decision-making. Highlights of this year’s edition include:
- Our research indicates that active manager volatility relative to the benchmark tends to be persistent, on average, while active manager returns and risk-adjusted returns tend not to be persistent.
- If active manager relative volatility tends to be persistent, how might we use this information to generate better outcomes?
- Lower relative volatility active managers have consistently delivered superior risk-adjusted returns in past decades. This finding may have implications for active manager selection for risk-conscious investors, and may also affect asset allocation decisions more broadly.
- In 2018 the Verus research team will research these topics further and seek ways to integrate the findings into our approach to asset allocation and active manager selection.