Top Five Articles from April: Active Equity, Robos, and ETFs

1. The Active Equity Renaissance: The Rise and Fall of MPT

After the dust settles, virtually nothing of modern portfolio theory (MPT) will remain, assert C. Thomas Howard and Jason Voss, CFA. The three pillars on which MPT rests have been toppled, and it is time to move on. There is an alternative way to view securities markets, their movements, and their participants: behavioral finance.

2. What’s Next for Robo-Advisers?

The future of the investment management industry is online and advisers will render themselves obsolete if they don’t figure out how to add value beyond just overseeing portfolios, Randy Cass, CFA, told delegates at the CFA Institute European Investment Conference. The good news is that advisers who can add value for their clients are secure. Lauren Foster explains.

3. To Compete with Robos, Advisers Must Become Financial Physicians

Can robo-advisers replace human advisers? Not if the goal of the relationship is to increase clients’ well-being, says Meir Statman. Why? Because that requires human interaction. Lauren Foster outlines Statman’s presentation from the CFA Institute Wealth Management Conference.

4. Keep ETFs Weird

The ETF has been at the forefront of three major investment phenomena over the past two decades, and as a result, has had a positive effect on the investment world, says Tadas Viskanta. The beauty of the ETF industry is its embrace of new ideas and strategies. Tamping down on that would only serve to make the investment world a less interesting place. So let’s “Keep ETFs Weird.”

5. The Active Equity Renaissance: New Frontiers of Risk

One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk, Jason Voss, CFA, and C. Thomas Howard write in this edition of The Active Equity Renaissance series. This initial error in MPT’s development is a major contributor to active investment management underperformance.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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