Most active managers underperform passive benchmarks

There are many possible explanations for this: BUT we see two big contributors.

Structural Issues in the Industry

  • An industry focused on short-term outcomes
  • An industry confused with too much information
  • An industry that encourages more analysis of securities rather than analysis of self
  • An industry obsessed by raising capital rather than by maximising existing assets

Behavioral Issues associated with Portfolio Managers

  • Most PMs check security prices multiple times per day – EVEN THOUGH – they acknowledge it is not useful to do so
  • All PMs have behavioural biases – almost all have never even considered exploring behavioural analysis
  • Most PMs don’t use a toolset to aid a disciplined approach
  • Most PMs think being ‘right’ about a security is key