The Many Faces to Active Equity Investing

Swimming against the tide? Active Management is still alive and kicking

The clamour for indexation is growing louder by the day, with a raft of data to support the assertion that most managers fail to beat their respective benchmarks. Despite this, a number of active asset managers continue to argue that index-beating returns do still exist and are sustainable. Conventional methods are still prevalent, including insightful analysis at the individual stock level, however investors are also utilising other approaches to generate alpha and add value, including thematic investing.

Active managers are keen to hold back the rising tide of indexation and utilise a number of methods in an attempt to 'add value' and generate alpha. Savvy Investor has selected a number of the best white papers in which several approaches to active management and alpha generation are examined.

FEATURED PAPERS

The Hunt for Europe's Tenbaggers (Baillie Gifford, Sep 2019)

Baillie Gifford argues that with a consistently applied investment process and a long-term perspective, the most successful businesses of the future can be identified.

Active Portfolios Start With Indexing (BlackRock, 2019)

(For compliance reasons, this paper is only accessible in Certain Geographies)

The process of choosing, then monitoring, an 'active' manager requires significant commitment in terms of both resource and investment. Blackrock considers if there is another cost effective solution.

Can Volatility Actually Help Protect Your Capital? (Intech, Oct 2019)

(For compliance reasons, this paper is only accessible in Certain Geographies)

Intech submits that volatility measures, both at a market and at an individual stock level can be harnessed to capture excess returns.

Minimum Variance: A Leg Up on Geopolitical Risk? (Axioma, 2019)

Axioma examines the performance of minimum variance strategies during prior periods of high geopolitical risk.

STOCK PICKING AND METRICS

Video: Can We Measure the Value of Research? (S&P Dow Jones Indices, 2019)

S&P introduces a new measure, capacity-adjusted dispersion, to help conceptualise the relative value of research across markets.

Free Cash Flow Works (Epoch Investment Partners)

Epoch reiterates their assertion that free cash flow remains a key metric upon which to base investment decisions.

The P/E Ratio: A User’s Manual (Epoch Investment Partners, 2019)

In this paper, Epoch propounds that most managers 'misuse' the P/E ratio, but that when used 'correctly' it can still prove a useful tool in investment analysis.

Share Buybacks: A Brief Investigation (Two Sigma, 2019)

Two Sigma examines the recent preoccupation of markets with US equity market buybacks.

Start of Something Big: Demystifying the Source of Large Alpha in Small Caps (QMA)

QMA investigates the phenomenon of 'small cap alpha' and finds that it does appear to exist.

The Revenge of the Stock Pickers (Financial Analysts Journal, 2019)

In markets dominated by trade in broad market or sector ETFs, this CFA report finds that in times of market turbulence, at an individual stock level, constituent securities can become 'mispriced'.

Is there another Woodford waiting to happen? (MSCI blog, Jul 2019)

Liquidity rules differ between markets: MSCI finds that some European UCITS funds would fall foul of SEC liquidity rules.

THEMATIC EQUITY SELECTION

Five things you should know about trends investing (Robeco, Mar 2019)

Robeco investigates Trend Investing and finds that several key elements combine to play a pivotal role.

Capturing the Asian century: tapping into Asia’s growth (Manulife IM, Jun 2019)

(For compliance reasons, this paper is only accessible in Certain Geographies)

Manulife explores at a macro level, some of the reasons contributing to the relative attractiveness of Asian markets.

Supertrends - Investing for the Long Term (Credit Suisse, 2017)

This report by Credit Suisse identifies several investable themes driving the growth in long term and 'thematic' investing.

PERFORMANCE OF ACTIVE MANAGERS

Buffett's Alpha (Financial Analyst Journal, 2018)

A 'deep dive' from the CFA investigates Berkshire Hathaway's remarkable long term (1976-2017) performance record.

The Overlooked Persistence of Active Outperformance (Neuberger Berman, 2019)

(For compliance reasons, this paper is only accessible in Certain Geographies)

Despite the prevailing tide towards passive investing, Neuberger Berman argues that active outperfomance is alive and kicking!

Risk-Adjusted SPIVA? Scorecard: Evaluation of Active Managers’ Performance (S&P Dow Jones Indices, 2019)

S&P finds that on a risk and fee adjusted basis, most US actively managed funds underperform their benchmarks.

ABOUT THE AUTHOR

Andrew Perrins is a former Actuary and Asset Allocator. After qualifying as an Actuary, he worked for 15 years in investment management, serving as Director of Asset Allocation for Abbey Life and for Chase Manhattan, before setting out on a more entrepreneurial path.

To contact him, email [email protected]