Great article by George Athanassakos, a Professor of Finance and the Ben Graham Chair in Value Investing at Ivey Business School, in which he answers two difficult questions regarding active management:
Why is it almost impossible for reported numbers to show that active managers beat benchmarks? But beyond that, what may make it actually difficult for active managers to outperform benchmarks?
Here’s an excerpt from that article:
So let’s be fair, give credit where credit is due and stop this active manager bashing. Active management is not doomed. Good active managers will survive and will keep making a good living out of active management, especially in an environment of increased volatility in the months and years ahead.
A slowdown in economic growth around the world, particularly in China, as well as a slowdown in productivity, lower population growth, aging baby boomers and lower government spending will lead to an increase in stock-market volatility. An expensive market in an environment of artificially low interest rates that have encouraged leverage both at the individual and corporate level will also contribute to rising volatility, both realized and expected. In this environment, active managers, such as value investors, will shine.
You can read the complete article here.
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