In 'The Death of Active Management Has Been Greatly Exaggerated' from the February 2023 issue of The Journal of Portfolio Management, Edward N. W. Aw of Bessemer Trust concludes that deficient portfolio construction, rather than weak security selection, is the main reason that most active managers underperform relative to…

Passive index funds continue to accumulate market share relative to active managers by offering cost-effective market exposure and strong relative performance across many popular market segments, particularly U.S. large cap equities.

This paper presents a comprehensive summary of systematic approaches for combining active managers in a portfolio.

Last year proved to be a challenging year for ESG investors. While ESG indices outperformed their non-ESG counterparts, active managers struggled. This paper provides an in-depth analysis of sustainable investment performance and flows in 2023 and highlights the key trends for 2024.

In this monthly chart pack we explore the U.S. retirement system, the impact of climate change on markets, and the performance of active managers.

Active investment managers have the potential to dramatically outperform their benchmarks over long periods of time, but not all of them are able to do it consistently. That’s why it’s important to understand the forces that can lead to active success and how they can have a bearing on both fund selection and portfolio…

In this report, we look at concentration over the past 75 years to see where we stand today and to reflect on what it means for active equity managers. We ask whether there is a correct level of concentration, both by comparing the U.S. to other global markets and by presenting the possibility that concentration was too low…

Exchange-traded funds used to be synonymous with passive investing. But as outflows drain from active mutual funds, some asset managers have turned to ETFs for salvation.

BBH’s 11th Annual Global ETF Investor Survey unlocks the trends, strategies, and product innovations driving the next evolution in ETFs, including a special section: The Era of Active. We surveyed 325 ETF investors, including institutional investors, financial advisors and fund managers across the U.S., Europe (including the…

For allocators and recruiters, the tendency to focus on portfolio outcomes as a proxy for investment skill can be alluring – who hasn’t been guilty of extrapolating a track record at some point? In this article, the Man GLG team provide a quantitative framework for unpicking manager skill from luck that may help you better…

Because of the 2015 Paris Agreement, the development of ESG investing and the emergence of net zero emission policies, climate risk is certainly the most important topic and challenge for asset owners and managers now and is likely to remain so over the next five years. It considerably changes portfolio allocation and the…

The first generation of index funds was designed to replicate an asset class; for example, the S&P 500 is the most common representative of large-capitalisation U.S. stocks. But not all active managers can be usefully evaluated by comparing them to large-capitalisation U.S. stocks; specialist mandates (perhaps…

The evidence that most active portfolio managers typically underperform passive benchmarks appropriate to their investment style is extensive — both historically and geographically. This paper asks a simple question: what (if anything) distinguishes the three years when most active managers outperformed from the 16 years…

Do high active risk (AR) equity portfolio managers tend to realize a relatively high information ratio (IR)? PGIM explores the AR-IR relationship across various global equity mandates and investment approaches. They find that the AR-IR relationship varies across mandates. The IR gap between Low AR and High AR managers tends…

Below-average market volatility is typically associated with above-average returns. Given a choice, therefore, most investors would prefer low volatility to high. For active managers, however, the choice is less obvious: lower market volatility is associated with lower correlation and lower dispersion, both of which make…

The S&P Persistence Scorecard attempts to distinguish a manager’s luck from skill. One key measure of successful active management lies in the ability of a manager to outperform his peers consistently. This report’s results show that, irrespective of asset class or style focus, few fund managers consistently outperformed…

It is easy to know if an asset manager is adding value- compare to the correct benchmark. But for an OCIO it is a different story. First and foremost, what is the correct benchmark? (I will answer that later.)

We demonstrate how time profiles of the excess returns on stocks purchased by active equity funds reveal the duration as well as the magnitude of gains arising from investment signals. The approach is illustrated for both individual funds and categories of funds.

We conjecture that personal experiences associated with extreme weather events drive the perceptions about climate change among fund managers and get reflected in the stocks they trade. To test this prediction, we study the effect of climate salience on the demand for green stocks among active mutual funds operating in 280…