What happens to active manager performance when risk is factored in? S&P DJI’s Gaurav Sinha takes a closer look at SPIVA data from markets around the globe.
It seems generally acknowledged that no investment strategy should be expected to offer an optimal trade-off between return and risk in all periods. Yet I often hear criticism of market-cap weighting, presumably because modern portfolio theory (MPT) postulates a hypothetical market portfolio as efficient in the mean-variance sense. Financial engineers, product developers, and asset managers…