Adding Science to the Art of Active Management

As the shift from active to passive investing in the discretionary equity space has continued to accelerate, it has become evident that traditional active asset management firms – i.e., long-only, fundamentally driven stock-pickers – are facing a serious crisis of relevance.

One reason for the shift from active to passive is that, collectively, traditional active asset managers have fallen short of investor expectations in failing to deliver risk-adjusted, net-of-fee performance. Maybe this is just a cyclical reversal, but perhaps there is a more enduring reason: that the world has changed while many traditional managers, proudly clinging to their artisanal approach, have not been able to adapt to the changing dynamics, and this lack of evolution has hampered risk/returns.

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