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Active management: the importance of cost, talent and patience

08 January 2018 | Portfolio construction

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Active management is challenging. However, we believe there are three factors which are most critical to improving the probability of outperformance: low cost, top talent, and patience.

  • Low cost continues to be the most effective quantitative filter that has been shown, with some consistency, to improve performance.
  • However, no quantitative factor alone can ensure outperformance. Indeed, a rigorous and thoughtful qualitative manager-selection process also must be present to identify top talent.
  • Finally, patience is necessary because positive excess returns are inconsistent, even among managers who outperform over the long-term.

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Important information

This document is directed at professional investors in the UK only, and should not be distributed to or relied upon by retail investors. It is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The information on this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results. Any projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2017 Vanguard Asset Management, Limited. All rights reserved.

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