Poll: How Are Active Fund Managers Finding Alpha?
In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers, “If your firm manages investments actively and any of your funds generated alpha in CY2013, to what will you primarily attribute the alpha?”
If your firm manages investments actively and any of your funds generated alpha in CY2013, to what will you primarily attribute the alpha?
Almost half of respondents, 47%, chose security selection as their primary source of alpha. Despite decades of emphasis on asset allocation by academics and practitioners alike, only 26% of respondents said asset allocation generated alpha for them this year. Whether this result is due to a lack of asset-allocation-alpha opportunities in markets this year or a lack of application of its principles, the result is noteworthy. According to 12% of respondents, money managers have also had success with macro bets. Proponents of ESG analysis, however, are likely disappointed, with less than 1% of respondents voting for that category. In summary, a money manager from 30 years ago would probably recognize the proportions as familiar.
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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Hi James,
A great question and thank you for pointing out the oversight. We will be asking the poll question again next year and I can ensure that ‘risk analysis’ is a separate category.
With smiles,
Jason
Do you mind sharing what the simple size of this poll was? Thanks!
Hi Gaston,
The results of this poll are not scientific as they utilize SmartBrief’s online polling facility where readers are able to vote more than once for a choice. That said, you may find it useful to know that 440 people responded.
Jason
Hello Jason, could it be possible that, since fund managers have the asset allocation aspect set for them given the funds’ mandate, the only thing left is security selection? In other words, in most cases they have limited opportunity to move between asset classes. If so, that would explain the disparity between the theory and this year’s results. Several studies have conclusively demonstrated that the asset allocation decision is far and above the most important contributor to the funds’ returns. I take this opportunity to wish you and yours the best of the season. Savio
Hello Savio,
Certainly possible. Given the diverse background (e.g. pension fund managers, private wealth managers, private equity, and so forth) of CFA members it is difficult to know exactly what motivated their selections.
Happy Holidays to you, too!
Jason
I find it troubling that 8% of managers aren’t sure where their Alpha came from.
Hi Patrick,
Thanks for your comment and for your concern. It would be nice to talk with the folks that selected ‘not sure’ to see if it were do to a lack of trying to discover where their alpha came from, or from the complexities of their strategies making it difficult to pull out the alpha hay from the haystack.
With smiles!
Jason