Identifying Manager Skill: Are You Just Getting Smart Beta?
Quantitative vs. Fundamental Equity Investing
In recent years, the landscape for active equity investors has evolved quite dramatically. While the active equity market has historically been dominated by ‘fundamental/discretionary’ managers, ‘quantitative/ systematic’ investing has been a growing force in the market (but remains a minority) — supported by technological improvements and data availability.
In the first part of this series, we compare and contrast the two main approaches in active management for equities, and dispelled some of the common misconceptions that investors have about ‘quantitative investing’. In the second part, we discuss how active quantitative should be measured against smart beta, and whether their higher management fees are justified. In the third part, we look at ways in which active quantitative and fundamental strategies can be complementary.
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