Active vs. Passive Investing
The asset management industry is at an inflection point. Learning clients’ goals, considering the whole picture, understanding their risk profiles, and using their unique objectives to create custom benchmarks are far better uses of time than debating the merits of active vs. passive investing, quarterly returns, or any of the other issues that are secondary to helping secure a brighter future for our clients.
Passive investing in India, us vs. them behavioral traps, and the dangers of market timing are among the topics covered in the latest Weekend Reads from India, curated by Shreenivas Kunte, CFA.
Leading posts from August include Preston McSwain's call for more honest and accurate fee disclosures and performance reporting; an examination of Sam Zell's take on the economy by Julie Hammond, CFA; tips on how to ace job interviews by Julia VanDeren; Will Ortel's exploration of what's in a hedge fund name; and an analysis of capital markets during times of war by Mark Armbruster, CFA.
A large asset manager has claimed their funds beat the S&P 500 93% of the time. Unfortunately, that's only true without accounting for fees. Preston McSwain explores what to learn from this exercise.
Have the advances in technology, computing power, and data made the markets more efficient? It’s “not clear,” according to Nobel laureate Eugene Fama.
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 the latest edition of The Active Equity Renaissance series. This initial error in MPT's development is a major contributor to active investment management underperformance.
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.
Collectively, active equity delivers no value to its investors and, in fact, extracts value from them. So what can be done to launch an active equity renaissance?
How many of the hedge funds out there are actually worth investing in? Ben Carlson, CFA, explores the question.
Active fund management is alive, thriving, and adding value across trillions of dollars of assets worldwide.