White Paper

The death of active management has been greatly exaggerated

Executive Summary

  • Since the global financial crisis, high correlations among stock prices have lessened opportunities for outperformance for actively managed equity funds, helping fuel explosive growth in passively managed strategies.

  • Active management strategies historically have worked best when market volatility has been high and/or rising, causing dispersion between stock prices to widen.

  • “Closet indexers,’’ funds that purport to be actively managed but in reality often mimic their benchmark indexes,don’t generally reflect the potential benefits of active management.

  • Research suggests that high conviction strategies in which portfolio components vary significantly from their benchmarks with minimal overlap have the most potential to outperform their indexes (and underperform, too).

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