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Truths and the Future of Active Equity Investing

Use of index strategies has increased in recent years, but investors globally say that has not diminished the importance of active equity strategies in their portfolios.

Our 2018 survey* of institutional investors around the world probed into their outlook for active equity
investment strategies.

About the survey respondents

Investment decision makers
Investment decision makers
Countries
Countries
Assets under management
Assets under management

Active management works for all equity asset classes and is beneficial everywhere. You need time, effort, money, and the risk tolerance to outperform, but it can be done.

— $7 billion US corporate pension plan
Active participants
Respondents expressed a sustained commitment to active equity strategies – irrespective of market environment – with the percentage expecting to have a high concentration (70%+) of their equity allocation in active strategies poised to swell by 2023.
Active participants
Clear strategy preferences
If seeking to add exposure to global equity markets, investors expressed strong support for thematic (e.g., ESG, sector, region, etc.) and systematic active strategies.
Clear strategy preferences
The power of two
The survey found that investors recognize active and index strategies do not represent an “either/or” choice. The focus is on finding the right combination of active and index equity strategies to help meet desired outcomes.
The power of two
Trust (and) the process
Respondents’ top selection criteria for active equity managers was risk management capabilities, followed by fiduciary record and reputation. Interestingly, management fees – while still a part of the equation – was not always among the primary considerations.
Trust (and) the process
Technology is a differentiator
Investors are well aware that the increased use of technology could dramatically alter the investment universe. Nearly all surveyed say a prospective asset manager’s technological acumen is at least “somewhat important,” with the majority saying it is either “very” or “extremely” important.
Technology is a differentiator

It’s not an “either/or” choice, in our view. We use active management in all asset categories, and passive is used to complement that.

— $100 billion US state investment board