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Will ‘Big Data’ Restore Active Managers’ Mojo?


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Using technology tools to look ahead.

The money devoted to research and analysis to make portfolio picks tends to produce holdings that dont perform sufficiently better, or better at all, than the ones in the index the manager is trying to surpass.

Credit: Mary Ann Smith

Thinking is expensive, and you often don't get what you pay for.

That, more or less, is why actively managed funds have such trouble matching the returns of index funds, which merely seek to mirror markets, not beat them.

The money devoted to research and analysis to make portfolio picks tends to produce holdings that don't perform sufficiently better, or better at all, than the ones in the index the manager is trying to surpass.

The chaotic trading conditions of the last couple of months haven't been much help. Since the market top on Feb. 19, actively managed large-company stock funds have lost 19.1 percent, as of Monday, compared to 18.7 percent for equivalent index funds, according to Morningstar.

Fund providers, especially big ones, are trying to narrow the gap by turning to "big data" and "machine learning," using sophisticated technological tools that are intended to take over much of the work that goes into filling portfolios.

 

From The New York Times
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