Active managers did it to themselves. That much is clear. I would beg to differ, though, about what really brought about all the damage.
You say it's because they let academic concept contravene the mandate. I say it's because of prevalent poor performance. http://www.bloomberg.com/news/articles/2014-06-03/the-nasty-brutish-lif…
It seems most of the times active managers deviate from benchmarks they hurt returns. People came to idolize benchmarks because deviating from them is mostly a bad idea.
Think about it. Active managers could de-emphasize some concepts and unshackle themselves as you suggest but then returns might turn out inferior all the same.
I think the real problem is talent. The industry needs capable calibers that can deliver better performance than the horrible 4 in 5 fail ratio. Hence I agree with the first point on your list of remedies. 'Earn AUM through performance, not marketing.' This really is first and foremost.
Thank you.
Active managers did it to themselves. That much is clear. I would beg to differ, though, about what really brought about all the damage.
You say it's because they let academic concept contravene the mandate. I say it's because of prevalent poor performance.
http://www.bloomberg.com/news/articles/2014-06-03/the-nasty-brutish-lif…
It seems most of the times active managers deviate from benchmarks they hurt returns. People came to idolize benchmarks because deviating from them is mostly a bad idea.
Think about it. Active managers could de-emphasize some concepts and unshackle themselves as you suggest but then returns might turn out inferior all the same.
I think the real problem is talent. The industry needs capable calibers that can deliver better performance than the horrible 4 in 5 fail ratio. Hence I agree with the first point on your list of remedies. 'Earn AUM through performance, not marketing.' This really is first and foremost.
Thank you.