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Active management’s changing face
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Ndina Rabali, chief investment officer of Lima Mbeu Investment Managers, discusses advantages of the ‘quant-amental’ approach.
As far back as 1974 Keith Ambachtsheer – currently a professor of finance at the University of Toronto – observed: “Active management is under serious attack because, as evidence knows, it has produced not over- performance but underperformance.” This statement still rings true.
Active management finds itself under significant pres- sure from passive funds because most active manag- ers have produced long-run underperformance of their benchmarks. Competition from passive funds is forcing active managers to justify not only their fees but also their existence. In this context, it’s vital that active man- agers evolve and capitalise on advances in technology for delivery of better client outcomes.
Active management is the process of building an in- vestment portfolio where the weights of individual se- curities differ from the market. In the long run, inves- tors expect a reward for taking on more market risk. Because of the higher risk that comes with investing in equities, they expect a higher return for investing in equities as opposed to cash.
Unfortunately, the same relationship does not neces- sarily hold when applied to active management. Inves- tors will not always receive a higher return for building a portfolio that looks very different from the market.
Ndina Rabali, Teboho Tsotetsi, and Bhekinkosi Khuzwayo
Lima Mbeu Investment Managers (Pty) Ltd is an authorised financial services provider in terms of section 8 of the Financial Advisory and Intermediary Act, 2002, FSP number 49018, Registration No 2017/399814/07. This document is for information purposes only. Past performance is not indicative of future performance. The information contained herein is derived from sources which are believed to be reliable. Any opinion expressed herein is based on the presenter’s current analysis and is subject to change. This presentation does not constitute an offer to sell or a solicitation to buy any security. Lima Mbeu has a conflict of interest policy which outlines how conflicts of interest are managed. This policy, as well as additional information about Lima Mbeu’s products, is readily available upon request or on our website: www.limambeu.co.za
For more information, contact Ndina Rabali: Email: ndina.rabali@limambeu.co.za
Tel: 010 023 0113; Address: Fredman Towers, 13 Fredman Drive, Sandton, 2196
