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Asset Allocator

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A rather blustery looking Asset Allocator carrier pigeon came forth bearing some rather intriguing news from Essentia Analytics, which provides some intriguing insights into why active fund managers underperform.

It found managers are generally good at picking stocks, with 58 per cent of the managers examined adding real value through stock selection, when compared with an index.

It found managers are generally good at picking stocks, with 58 per cent of the managers examined adding real value through stock selection, when compared with an index.

But it found that active managers made the correct decision only 18 per cent of the time.

Essentia says the difference between the two numbers is that managers, even when they get stock selection correct, mess up on areas such as when to sell and appropriate sizing of a position, and it is this which drags down performance overall. 

As liquidity tightens in global markets, it may be that allocators start asking additional questions around those areas in the months ahead.

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