ACTIVE? PASSIVE? FOCUS ON OUTCOMES FIRST

When investors ask whether their investment strategy should be active or passive, Anne Lester of AMC member J.P. Morgan Asset Management tells them they should be using both strategies to get the right exposure to the asset classes that will give them the highest chance of achieving their investment goals.

KNOW WHAT YOU OWN, KNOW THE RISKS

Many investors think that investing in an index fund gives them diversity and low risk. Michael Cross of Active Managers Council member SouthhernSun Asset Management says that misconception can cost investors money in the long run - and that it's crucial that investors know what they own, and what risks come with their investments.

WHITE PAPER: A MORE BALANCED NARRATIVE

 
The tug of war between active and passive investment strategies has grown increasingly one-sided in recent years. This paper examines the current narrative surrounding the two styles and challenges the conventional wisdom driving the three most common criticisms of actively managed investments: that active managers don’t outperform their indexes, that active managers can’t outperform their indexes, and that identifying above-average active managers isn’t possible. The paper presents a more balanced discussion of the factors that drive relative performance between active and passive investing, examines the methodologies for comparing the two approaches, and argues that passive investing is raising the bar for active managers. Active and passive strategies can happily coexist and both offer distinct benefits. Only when investors abandon the false dichotomy that one is good, the other bad, will they be able to build more optimal portfolios. (See related blog post and white paper)

MYTH #1: ACTIVE MANAGERS DON’T OUTPERFORM

In the IAA Active Managers Council's new White Paper, "A More Balanced Narrative: Setting the Record Straight on Active Management," author David Lafferty debunks three common myths about active management: that active managers don't outperform, that active managers can't outperform, and that investors can't identify outperforming managers. In this video, Lafferty discusses the first myth - that active managers don't outperform. (See related blog post and white paper)

MYTH #2: ACTIVE MANAGERS CAN’T OUTPERFORM

In the IAA Active Managers Council's new White Paper "A More Balanced Narrative: Setting the Record Straight on Active Management," author David Lafferty debunks common myths about active management -- including the misconception that active managers cannot outperform their benchmarks. (See related blog post and white paper)

MYTH #3: INVESTORS CAN’T IDENTIFY OUTPERFORMING ACTIVE MANAGERS

One of the common myths about active management that's debunked in the IAA Active Managers Council's new White Paper "A More Balanced Narrative: Setting the Record Straight on Active Management." In this video, author David Lafferty explains that investors can, contrary to conventional wisdom, identify active managers who outperform their benchmarks. (See related blog post and white paper)

ACADEMIC REVIEW: ACTIVE MANAGEMENT IS CRUCIAL TO MARKET EFFICIENCY

Active managers play a crucial role in the efficiency of the U.S. capital markets, according to Professor Russ Wermers of the University of Maryland's prestigious Robert H. Smith School of Business. Discussing his new paper "Active Management and Market Efficiency," Wermers said that among other things, active management ensures that stock prices are fair. And he predicted that as we become tilted "way too heavily" toward passive management, there will be major dislocations in markets. (See related blog post)

ACADEMIC REVIEW: A NEW CONVENTIONAL WISDOM ON ACTIVE MANAGEMENT

Martin Cremers, the Bernard J. Hank Professor of Finance and the University of Notre Dame's Mendoza College of Business, discussed findings of his comprehensive review of academic literature regarding active management of investments at the Investment Adviser Association's 2018 Leadership Conference. That review - Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds -- was performed by Cremers with colleagues Jon A., Fulkerson of the University of Dayton and Timothy B. Riley of the Sam M. Walton College of Business at the University of Arkansas. Their review concludes that contrary to the currently popular narrative, actively managed funds generate positive value for investors. (See related blog post)

OUTCOMES ARE WHAT WE CARE ABOUT

In the debate over active vs. passive investment management, "Outcomes are what we care about," says Anne Lester, Head of U.S. Retirement Solutions for Global Asset Management Solutions at J.P, Morgan Asset Management. Ms. Lester spoke as part of The Advantages of Active Management in a Powerful Portfolio, a presentation at the Investment Adviser Association's 2018 Leadership Conference in Dallas. (See related blog post)

THE ROLE OF ACTIVE MANAGEMENT

Scott Gonsoulin, Investment Manager with the Teacher Retirement System of Texas, explained why that system skews in favor of active management -- and the role that active management plays in the system's overall investment strategy -- at the Investment Adviser Association's 2018 Leadership Conference. He spoke as part of the presentation The Advantages of Active Management in a Powerful Portfolio. (See related blog post)