Chuck T, according to our research, fund managers need to ensure that the ‘star quarterback’ is playing AT LEAST two-thirds of the ‘game’. And that is not the case today.

Risk is always a consideration, but usually it is in terms of ABSOLUTE risk. A large Beta Anchor does not reduce overall risk, just RELATIVE risk. The latter matters, and has large business implications for the fund firm, but assuming a fund has a market-level risk profile, then they had better reliably deliver performance that can beat the benchmark.

Keep in mind, the industry’s overall relative performance results show that the vast majority of active managers are underperforming. Flow data between passive and active funds/ETFs indicates that the marketplace has pretty much figured this out. Simply put, for quality managers, they need to maximize the percent of the portfolio allocated to High Conviction Overweights or their statistical ability to outperform is severely compromised.
Alexey