Two studies find active management “put” was AWOL in 2008
| Apr 22nd, 2009 | Filed under: Academic Research, Retail Investing, Today's Post | By: Alpha Male |
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With many investors now convinced that markets will trade sideways for some time, they say beta returns should be forsaken in favour of alpha-centric returns. Meanwhile, emboldened by what they see as a fire sale in equities, many other are increasing their equity beta exposure right now. As a result, the age-old tug-o-war between active and passive management seems to have moved back to the front pages.
S&P released this report earlier in the week that was aimed squarely at those who believe active management embeds some kind of put option that protects it during market downturns. The report highlights the common assumption that active managers can move to cash in times of distress – that they essentially trim their beta exposure in response to the prevailing winds (an argument often made by hedge funds – the quintessential active managers).
But despite this apparent advantage, S&P found that less than half of active managers outperformed their benchmarks in 2008 – a period when markets fell precipitously. The report doesn’t mince words: More…
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