20 min

Why the S&P 500 is an Active Portfolio, and Other Observations on the Stages of Active Management Excess Returns

    • Investing

Active management deserves all the criticism it gets. After all, over 80% of equity managers underperform their benchmarks over the long-term and active managers charge vastly higher fees compared to passive indices.

But active management also gets a bad rap. There are many active strategies that perform very well over time, and justify the fees they charge.

How can both of these conflicting statements simultaneously be true? The answer lies of the definition of the term “active management” and the fact that many strategies that investors consider passive also have significant active components. 

In this episode we talk about the various types of active management and the pros and cons of each. 

We discuss:

- Why the S&P 500 is an active portfolio

- The various approaches to fundamental indexing 

- The one type of active management that should be avoided at all costs

- The pros and cons of factor investing

- Whether the days of the star fund manager are over

ABOUT THE PODCAST

Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.

SEE LATEST EPISODES

https://www.validea.com/excess-returns-podcast

FIND OUT MORE ABOUT VALIDEA

https://www.validea.com

FOLLOW OUR BLOG

https://blog.validea.com

FIND OUT MORE ABOUT VALIDEA CAPITAL

https://www.valideacapital.com

FOLLOW JACK

Twitter: https://twitter.com/practicalquant

LinkedIn: https://www.linkedin.com/in/jack-forehand-8015094

FOLLOW JUSTIN

Twitter: https://twitter.com/jjcarbonneau

LinkedIn: https://www.linkedin.com/in/jcarbonneau

Active management deserves all the criticism it gets. After all, over 80% of equity managers underperform their benchmarks over the long-term and active managers charge vastly higher fees compared to passive indices.

But active management also gets a bad rap. There are many active strategies that perform very well over time, and justify the fees they charge.

How can both of these conflicting statements simultaneously be true? The answer lies of the definition of the term “active management” and the fact that many strategies that investors consider passive also have significant active components. 

In this episode we talk about the various types of active management and the pros and cons of each. 

We discuss:

- Why the S&P 500 is an active portfolio

- The various approaches to fundamental indexing 

- The one type of active management that should be avoided at all costs

- The pros and cons of factor investing

- Whether the days of the star fund manager are over

ABOUT THE PODCAST

Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.

SEE LATEST EPISODES

https://www.validea.com/excess-returns-podcast

FIND OUT MORE ABOUT VALIDEA

https://www.validea.com

FOLLOW OUR BLOG

https://blog.validea.com

FIND OUT MORE ABOUT VALIDEA CAPITAL

https://www.valideacapital.com

FOLLOW JACK

Twitter: https://twitter.com/practicalquant

LinkedIn: https://www.linkedin.com/in/jack-forehand-8015094

FOLLOW JUSTIN

Twitter: https://twitter.com/jjcarbonneau

LinkedIn: https://www.linkedin.com/in/jcarbonneau

20 min

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