Active management: the importance of cost, talent and patience
08 January 2018 | Portfolio construction
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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