Practical analysis for investment professionals

active management


Alpha Wounds: Short-Termism

Short-termism is a major alpha wound that hurts the performance of active investment managers. Short-termism leads to higher trading costs, makes it harder to properly evaluate the management of businesses, imposes time constraints that prevent investment strategies from reaching full flower, and increases bias. New research demonstrates this pressure is coming from clients rather than from investment managers themselves.

UK Active Fund Managers: Analyzing Their Value

Every day investors are inundated with noise — almost all of it irrelevant — about what they should do. Then, when there really is something important — information that will genuinely help you achieve better returns — it often gets drowned out. Such is the case with a recent study on the merits of active fund management.

Better Investment Consulting Is Long Overdue

Active managers consistently fail to earn their fees year after year. What can change this pattern of repeated failure? Ron Surz, president and CEO of PPC, Inc., weighs in.

Why Hasn’t Active Investing Outperformed Passive Investing in Recent Years?

The results of our latest CFA Institute Financial NewsBrief poll reflect the tug-of-war between the two camps in the long-running active vs. passive debate.

Alpha Wounds: A Lack of Diversity in the Human Resources Portfolio

Investment managers believe in diversifying their portfolio of investments, but what about their human resources portfolio?

Alpha Wounds: Benchmark Tail Wags the Portfolio Management Dog

Active management is under siege from many corners. Yet many of these alpha wounds are self-inflicted. Chief among them is benchmark idolatry.

Forum: The Future of Active Management

The travails of active managers in recent years have been well-chronicled. Their poor collective performance has led investors to flee actively managed funds for passive products and others to question their relevance. To better understand the challenges facing active managers today, the industry’s response to those challenges, and the likely future state of the industry, CFA Institute is hosting an online forum as part of its Future of Finance initiative.

13F Watch: In Defense of Active Share

The poor performance of active management has been well chronicled of late but the active fund management industry is not going down without a fight. Apologists have been quick to point to artificially low interest rates as one factor dragging down the collective returns of stock pickers. Index huggers — those managers with low tracking error funds and almost no hope of outperforming their benchmark after fees — are also to blame. In response, active managers are pointing to their “active share” — a measure of how much a portfolio’s holdings differ from those of its benchmark — and research that suggests funds with the highest active share do indeed beat their benchmarks. A review of just-filed quarterly 13F reports reveals that some of the most prominent fund managers truly embrace their role as active portfolio managers.

Betting with Buffett: Seven Lean Years Later

Standing seven years into a 10-year wager with Warren Buffett that hedge funds would outperform the S&P 500, we sure look wrong, says Ted Seides, CFA. What follows is an assessment of why, and an outlook on where to go from here.

Beating the Market: Four Mistakes to Avoid

Active management is a tough gig. But knowing what does not work at least gets investors a step closer to finding their own secret sauce. Here are a few suspicious approaches some active managers pursue. Rather than adding alpha, these are more like illustrations of how not to beat the market.



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