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Anatomy of Active Portfolios

categories: Indexes, Portfolio Management Analytics, Americas, EMEAI, Factor and Risk Modeling, Investing (Investment Management), Performance Analysis, Risk Management, Asia Pacific, Asset Owners, Equities, Research Paper, AYLUR SUBRAMANIAN Raman, Asset Managers (Quant or Fundamental), ROISENBERG Leon, general

In constructing portfolios, asset managers expose the portfolio to factor tilts that greatly influence fund performance. Some of these exposures, which can provide sources of excess return, may be intentional but others may not. A manager who makes the wrong bet could be on the wrong side of history. Using MSCI’s Peer Analytics dataset, we examined the composition and performance drivers of active global funds through the lens of our Global Total Market Equity Model. Our key finding: Exposure to common factors accounted for 55% of funds’ 5-year active performance vs. 45% for stock-specific contributions during a 13-year period.

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