Active Beta Indexes – Khalid Ghayur

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Description

An informative guide offering new and innovative ways to think about active management and investing

ActiveBeta Indexes presents exciting new research that shows how above-market returns can be achieved in a low-cost, transparent, and efficient fashion. Active Betas reflect fundamental investment principles that have long been the foundation of active equity returns, but are commonly masqueraded as investment skill, or alpha. This groundbreaking book lifts the veil to uncover the common sources of active returns and reveals their beta-like properties.

Developed by leading investment practitioners at Westpeak Global Advisors, ActiveBeta Indexes introduces Active Beta sources and explains how the behavior of short- and long-term earnings growth gives rise to systematic sources of active equity returns.

Details a new index framework and research findings that could change the face of active portfolio management

Presents patent-pending innovations for constructing style indexes and informationally-efficient active portfolios

Explores the historical performance of ActiveBeta Indexes

Wealth advisers, consultants, pensions and endowments, and other institutional investors will find the intellectual honesty of ActiveBeta Indexes a refreshing perspective on the active management industry. They will also find it a useful guide to a more strategic allocation of their risk and management fee budgets – a growing necessity in these challenging times.

From The Inside Flap

What is the nature of active equity management returns? Do active equity managers truly add value? Do they have idiosyncratic skill or are they providing only beta-like systematic sources of active return? In this groundbreaking book, the authors provide new answers to some of the oldest questions about investing.

What if, they suggest, a significant portion of active management returns were driven by systematic sources of active equity returns? And what if these systematic active return sources could be captured more efficiently, transparently, and cost-effectively in a passive index structure? The result would be an innovative framework—ActiveBeta® Indexes.

ActiveBeta Indexes presents an investment solution that better defines the investment styles of active managers (i.e., common sources of active returns) and provides an efficient, transparent, and cost-effective passive capture of a significant portion of traditional active management returns. The authors first describe the basis for and evolution of market and style indexes, exploring their development and their limitations. They then detail the theoretical framework and supporting research behind the ActiveBeta Indexes. After introducing the concept of Active Betas, they present their research into the nature and relationships, as well as the pricing and persistence, of the systematic sources of active equity returns. They proceed to illustrate the methodology employed to create the ActiveBeta Indexes and offer a detailed analysis of their performance. The authors then demonstrate the various applications of the ActiveBeta Indexes, including their uses in style investing, performance attribution, portfolio structuring, and asset allocation. They conclude by offering a variety of customizable, alternative solutions for capturing the systematic sources of active equity returns.

The investment industry needs to take a critical look at the current state of traditional active management and style investing. The ActiveBeta Framework offers explanations to solve many of the puzzles in the current investment literature and practice. Portfolio managers, asset managers, wealth advisors, pensions and endowments, and other institutional investors seeking to improve returns while reducing costs will find ActiveBeta Indexes a solution to their performance needs in these challenging times.

From The Back Cover

Active Beta

Indexes

A Groundbreaking New Index Framework

“By providing new answers to some of the oldest questions about investing, this innovative framework offers the investment community a chance to reinvent itself.”

—From the Foreword by Andrew W. Lo

How did we end up with growth and value as the standard dichotomy of investing? Are there better ways of defining investment styles? ActiveBeta Indexes presents a more relevant classification of investment approaches than the traditional classifications in a groundbreaking new index that captures systematic active return sources.

The authors outline the research and strategies for capturing systematic sources of active equity returns usually attributed to active management via a passively managed index—in a transparent manner with lower risk and greater diversification, at a lower cost, than active management. Their new indexes more accurately reflect the investment processes and investable universes of active growth, value, and core managers—and thus represent more appropriate performance benchmarks for active style managers.

These exciting new findings could change the face of active portfolio management. The bottom line: why pay high fees for active management performance when you can get a significant portion of this performance at a fraction of the cost?