Over the past decade, passive investing has become increasingly popular with assets pouring into ETFs and low-fee, index-tracking mutual funds.
Earlier this year, FactSet commissioned Greenwich Associates to explore the global shift from actively managed funds to passive, index-tracking strategies. From March to May 2017, the group interviewed portfolio managers, chief investment officers, and analysts at asset management companies across the United States, Europe, and Asia. According to the results of the research, while 78% of global institutional assets still remain in actively managed accounts, their share is expected to drop further to 74% by 2020.
Against this backdrop, how can portfolio managers differentiate themselves to win against passive investment strategies? The findings of this research shed light on what makes a strong portfolio manager.
Demonstrating Your Value as a Manager
In discussing the key attributes of a successful portfolio manager, one theme was repeated throughout our conversations; the need to define and implement a disciplined investment process. Other desirable attributes included a clear investing philosophies, a disciplined approach, and a willingness to remain flexible as opportunities arise.
While they cannot directly control financial markets and the performance of their funds, portfolio managers can control the process that leads to the construction of their portfolios. To partner with clients over the long term, it is important to develop customized investment products tailored to clients’ specific requirements and embrace the attributes indicated above. Before implementing an investment strategy, a portfolio manager and his team must conduct extensive research and perform numerous back-tests, stress tests and simulations, fine-tuning along the way.