Bull Markets Don't Last Forever, and Piling Into Passive Approaches Today May Risk Weaker Returns in the Future; Savvy Institutions Stay Sensitive to Valuations and Maintain a Long-Term Perspective on Returns, Says Cambridge Associates
BOSTON, MA--(Marketwired - May 19, 2015) - For the last five years, alpha returns -- outperformance compared to benchmark indexes -- from U.S. equity active managers have been less significant, less important to meet portfolio objectives and, at the same time, harder to find. This is largely due to the strong performance of U.S. equities, and has led many investors to put the hunt for alpha, particularly in this market, on the back burner.
However, the savviest investors always remember that what goes up must come down. They know that going where so much money is today may not reap outsized rewards tomorrow -- and they remember that, in the long run, alpha returns are worth the significant effort to get them, according to Cambridge Associates, the global investment advisor to institutions and private clients.
"In the past five years or so, it has been tough to generate alpha over U.S. equities. The U.S. public equity markets are up about 200% since March of 2009, and many investors might think that, given their success at capturing strong returns via passive investing in that timeframe, there is little reason to focus on alpha now," says Max Senter, Managing Director and an outsourced CIO within Cambridge Associates' outsourcing investment practice.
"But piling into these kinds of passive strategies now means that you will only obtain market returns in a more difficult, lower-valuation environment. In our view, active managers who are not benchmark-focused are key for long-term returns and sustained alpha generation," adds Senter.
Qualities of an Investor with a Maintained Focus on Alpha
"Alpha is always important, and since overall market performance won't always be as positive as it has been over the last five years, the most successful institutional investors are always on the lookout for opportunities to generate alpha," says Celia Dallas, Chief Investment Strategist at Cambridge Associates.
Sophisticated investors with an eye toward alpha generation exhibit a number of hallmark characteristics, including:
For more information or to speak with Max Senter or Celia Dallas, please contact Frank Lentini, Sommerfield Communications at +1 (212) 255-8386 / Lentini@sommerfield.com.
This release is provided for informational purposes only and is not intended to be investment advice. Any references to specific investments are for illustrative purposes only. The information herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. This release is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. Past performance is not a guarantee of future returns.
Copyright © Cambridge Associates LLC 2015. All rights reserved.
About Cambridge Associates
Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 1,000 global investors and delivers a range of services, including investment advisory, outsourced investment solutions, research and tools (Research Navigator and Benchmark Calculator), and performance monitoring, across asset classes. Cambridge Associates has more than 1,100 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit www.cambridgeassociates.com.
Contact Information:
Media Contact:
Frank Lentini
Sommerfield Communications, Inc.
+1 (212) 255-8386
lentini@sommerfield.com