Active Money Management Isn’t Dead Yet
There are five niches that should survive
Bloomberg, August 13, 2018
If we are to believe the pundits, active management is dying, indexing is taking over the world, but – “Newsflash!” no, it is not, as massive inflows have slowed down. As is so often the case, getting at the truth requires a more nuanced inquiry beyond extreme, click-worthy headlines.
The first volley against the citadel of active stock selection was the rise of the efficient market hypothesis (EMH). Some have argued that EMH traces back to 1900, but for our purposes, Eugene Fama’s 1965 dissertation[i] is a sufficient starting point. While not a perfect theory – it does not explain the irrationality of bubbles, booms and busts – for the most part, it does an admirable job explaining why managers who can consistently beat the market over long periods of time are so very, very rare.
Increasingly specialized portfolios and strategies are replacing the chin rubbing, stock selecting managers of old.
Full column is published at Bloomberg.
[i] Fama, Eugene (1965). “The Behavior of Stock Market Prices”. Journal of Business. 38: 34–105. doi:10.1086/294743. 1965,