Stock Selection and Analysis

A Look Into Active Equity Strategies

Strategies for Active Equity Portfolio Management

With fees being squeezed from the rise of passive managers and the prevalence of ETFs, it's a very competitive environment for active equity managers.

The following papers examine better ways of managing active equity portfolios, covering topics such as value investing, trend-following, small cap alpha, sustainability, emerging markets, and smart beta, as well as a look into the pace of innovation and the automation industry.

Savvy Investor

Better Equities: Redefining 'active' (Willis Towers Watson, 2017)
Market trends show investors are losing faith in active management and moving to passive strategies. However, with low expected returns from beta, investors are more in need than ever of active management. So what is to be done?

Active Strategies, Indexing and the Rise of ETFs (BlackRock, Oct 2017)
(For compliance reasons, this paper is only accessible in the USA)
Institutional flows into ETFs are expected to grow to $300B annually by 2020. This paper presents the results of the industry's most comprehensive study to date of the global institutional market for exchange-traded funds.

Sustainability disclosure drives investment decisions (Eaton Vance, 2017)
(For compliance reasons, this paper is only accessible in the USA and Canada)
A new study by HBS Professor George Serafeim states that sustainability disclosure is, in a way, driving investment decisions, as investors use that information to hone company valuations relative to their industry peers.

The Long and the Short of It: The Quant Shorting Advantage (QMA)
QMA’s paper explains how short selling may allow investors to find alpha in places which are often overlooked, describes the key categories of shorting-enabled equity products, and highlights the benefits of a quantitative process.

Impact of Strategy Size on Performance: Global Report (eVestment, 2017)
In this eVestment paper, the authors look at the six most viewed equity, three most viewed fixed income, and top viewed balanced/multi-asset universes per client region, and provide performance, risk statistics, and portfolio characteristics for underlying strategies across multiple timeframes. The aim is to provide a summary of what the actual returns, risk, and exposures, investors may have assumed across rolling timeframes.

Start of Something Big: The Source of Large Alpha in Small Caps (QMA)
From studies into small-cap strategy, QMA explain that capturing alpha in small caps isn't mysterious. It is largely a result of inefficiencies that create pronounced mispricings that managers may more frequently exploit, provided they have the discipline and the skill to harvest it.

Two emerging market strategies can be stronger than one (Robeco, Oct 2017)
Two global emerging equity strategies, a fundamental and a quantitative one, which have both proven capable of delivering alpha, can be even more robust when combined.

Toward Dynamic Stress Tests (Axioma, Nov 2017)
Axioma discusses a technique used to enhance traditional transitive stress tests, namely, by using statistical techniques to identify different regimes, and when appropriate, dynamically adjusting each regime's impact upon the stress test.

Demystifying the Source of Large Alpha in Small Caps (QMA)
Capturing alpha in small caps isn’t mysterious; it is largely the result of pervasive inefficiencies that create more pronounced mispricings that managers can regularly exploit, provided they have the skill and discipline to harvest it.

An Asset Allocation Primer: Markowitz, Kelly and Risk Parity (PIMCO, Oct 2017)
This article describes and contrasts the mechanics of standard asset allocation models, including the utility based, Markowitz, Kelly, risky parity and fixed allocation approaches.

Adding Science to the Art of Active Management (William Blair, 2017)
In this paper, Portfolio Manager Ken McAtamney explains why employing a state-of-the-art investment process incorporating data-analysis tools is critical for the evolution of active asset management. 

The rationale for trends investing (Robeco, Aug 17)
In this paper Robeco sets out their trends investing philosophy and aims to lay the foundation of a conceptual and analytical framework for trends investing that moves beyond mere story-telling.

Invested in Disruption: IQ Magazine Q3/Q4 2017 (SSGA)
As the pace of innovation and disruption accelerates, SSGA looks at game-changing shifts that are redefining ideas around investment performance and value, as well as how investors can navigate this new landscape.

Adding Alpha by Subtracting Beta: How Quant Tools can Improve Returns (Axioma)
This paper demonstrates how fundamental managers can use quantitative tools to identify and lessen potential issues in their portfolios, while still maintaining their investment views.

The Six Sins of Smart Beta (Lazard, 2017)
Studies have shown that there are anomalies in the market owing to how investors price certain stocks. Smart-beta strategies attempt to exploit these anomalies in order to outperform the broader market.

Value: A Practitioner's Guide (S&P Dow Jones Indices)
The goal of value investing is to buy stocks that are trading at a discount relative to their peers, but have upside potential, yet measuring relative 'cheapness' and determining appropriate allocations are critical considerations. 

Longer Term Investments: Automation and Robotics (UBS, 2017)
Demographic changes, rising labor costs in emerging markets, productivity gains, and rising IT penetration could lead automation companies involved with industrial processes, software, 3D printing, drones, and AI to outperform.

 

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