From FT Alphaville:
Stock picking works! (sort of, maybe)
A white paper lands from Commonfund, a type of investment consultant and asset manager for US endowments. It asks the question: does active management benefit endowment returns?Always keeping in mind that for an endowment the only quarter that should matter is the next quarter-century.
Concerned people really would like to know. And the answer is a qualified maybe, in that Commonfund finds correlation between the amount of US stock holdings that an endowment chooses to actively manage, and the likelihood that the stock portfolio will outperform the market.
However to get there involves some fun with statistics. What Commonfund gets out of the way first is that it doesn’t have the data to answer the question definitively.
The evaluation of whether endowments’ active equity investments underperform, are not different from, or outperform their passive investments in U.S. markets requires knowing the returns earned and costs incurred by endowments pursuing both active and passive management strategies. This granular data is not readily available.Fear not, instead the group can a broad sample of endowment managers about the realised cost, allocation and performance of their actual active and passive positions....MORE
