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A Battle Plan For Active Managers

Mar. 08, 2020 7:04 AM ET1 Comment


  • Innovation in new tools and tech-driven approaches are challenging conventional thinking in asset management and offering new resources to traditional investment methodologies and processes.
  • There is a new generation of sophisticated tools and models to analyze price trends adding another layer of intelligence and a dynamic market perspective around fundamentally chosen stocks.
  • Acting as a complement to asset managers traditional research and fundamentally driven strategies, trend analysis easily fits with any investment style.
  • Active management can potentially beat passive products more readily with the adoption of trend analysis data and technology built to complement and strengthen their investment decision process.

[Everything in financial services is evolving. Innovation in new tools and tech-driven approaches are challenging conventional thinking in asset management and offering new resources to traditional investment methodologies and processes. Especially as active managers as a group keep getting broad-brushed with a poor relative performance stigma, these established tech trends can potentially arm them with new battle plans to more consistently beat their benchmarks.

One area that seems to be increasingly making itself known is a new generation of sophisticated tools and models to analyze price trends. Adding well tested, intelligent trend analytics into the investment decision process has been proposed as a complement to asset managers' traditional research and fundamentally driven strategies. By adding another layer of intelligence and a dynamic market perspective, advanced analytics can enhance the investment process offering the potential for generating more alpha and risk management protections.

Since such tools and innovative approaches tend to go where fundamentals do not tread, they may be able to capture important market dynamics around fundamentally sound investments. Importantly, this may reveal a strong rip current lurking dangerously underneath seemingly calm waters providing investment managers with the means to be able to look at the forest for context, not just at the tall strong trees.

That is why we went to new Institute member Rocco Pelligrinelli, CEO of Trendrating - a Swiss company providing advanced analytic solutions for active investment managers. We invited him to share his first-hand industry knowledge of these tools and his firm’s experience in enabling trend-capture in a simple, systematic and transparent way to add value consistently over time. This area may well be creating a new frontier for active management.]

Hortz: You oppose what you call “simplistic rationales” used by many to argue against active managers' relative performance in the active-passive debate. What do you think are the

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Institute for Innovation Development (IID) is an educational and business development catalyst for growth-oriented financial advisors and progressive financial services executives who are determined to grow their firms in a business environment of accelerating business and cultural change. Run as a social enterprise, the Institute will be dedicated to help make business innovation best practices a vital cornerstone for members’ ongoing growth, competitive differentiation, and client/community engagement strategies. Three current IID initiatives are: 1. Integrating business innovation mindsets, processes and tools into financial services practices through the formation of Advisor Practice Management 3.0 professional development. 2. Applying business innovation as a powerful and differentiating advisor marketing/branding approach and community engagement strategy. 3. Creating a FinTech radar program to increase communication and access between the financial advisor and early stage FinTech communities. Bill Hortz, Founder and Dean, of the Institute and Institute Founding Innovator members (comprised of top cross-industry innovation experts, innovative fintech companies, and progressive minded financial advisors and industry thought leaders) will be contributing articles and hopefully sparking ideas and discourse on much needed, next-generation advisor business models and industry development. We will seek to uncover proven business innovation best practices; learn from innovative business creators; explore innovation mindsets; hear about new approaches, services and technologies; and ultimately discover how to apply these insights to a financial advisor's business. For more details about the Institute, investigate here: https://innovationdevelopment.org/annual-membership

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (1)

Ronald Surz profile picture
Dr. Robert Haugen shook up the academic world in 1986 with his proclamation that markets could be beaten with technology. We discuss this and more in a recent broadcast at www.youtube.com/...
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