REIT Outperforms Through Active Management

As active stock managers continue to face competition from low-cost index funds, some firms have managed to outperform benchmarks by using “specialized expertise and fundamental research in sectors like real estate and energy,” according to an article in Institutional Investor. The article cites the example of Cohen & Steers, a firm that has managed real estate investment trusts since the 1980s, which is “beating index fund rivals as many have been hit hard by problems in the retail sector.” The firm’s president and chief investment officer Joseph Harvey attributes the performance to the fact that its managers, “began lightening up […]

Ariel’s John Rogers Defends Active Management

Before becoming the founder and chairman of Chicago-based Ariel Investments, John Rogers Jr. was a varsity basketball player at Princeton University and a winner at both Wheel of Fortune and Warren Buffett’s NetJets Poker Invitational in Las Vegas. This according to a recent Barrons article. During a recent interview with Barrons, Rogers said, “I worry that our industry hasn’t done an effective job of defending itself and showing the value that is added by active management.” Here are some interview highlights: Rogers gravitates toward businesses with strong recurring revenue, such as real estate management companies. “These are businesses that fit […]

Active Management is Alive and Well

An article in last month’s Enterprising Investor outlines some interesting insights into how active management is “alive, thriving and adding value across trillions of dollars of assets worldwide.” The author cites research showing that “focused” active managers—those specializing in certain asset classes, sectors, etc.—can outperform index funds. One example cited is that of smaller, earlier-stage companies where “the dispersion of returns is wide and failure rates can be high.” The article references a study showing that sector-specific private equity managers outperformed “generalists” which, it says, “suggests that a scattergun approach will backfire in private markets.” Bond index issues are addressed, […]

Has Trump Resurrected Active Management?

Hedge fund manager Dan Loeb believes the current environment is “undoubtedly better for active investing—just as active investing was considered to be on its deathbed,” according to an article on last week’s CNBC.com. Third Point’s Loeb argues that higher rates will create opportunities for active managers, “reversing the one-way trade in yields that dampened the past few years.” He cites Trump’s promises to cut taxes and regulations as potential causes for the shift. The article states, “other market strategists have also said that 2017 is the year stock picking, or active money management, can increase investment returns after suffering amid […]

Active Investors Get a Chance to Shine

From the investor’s standpoint, a low level of unemployment isn’t necessarily good news, says a recent Bloomberg article. However, it can bode well for active versus passive investors. When more people are working, it says, “Wage growth can exceed economic growth, putting pressure on corporate profit margins. Interest rates can rise, tightening financial conditions. Inflation can rise, putting more pressure on central bankers to remove liquidity from the system.” For active investors, however, it presents the opportunity to outperform benchmarks, “which are much lower hurdles to beat than in the early investor-friendly stage of an expansion.” During the current, long-winded […]