The Active Equity Renaissance: Renaissance Investment Management Firms

Posted by Jason Apollo Voss on May 23, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments Throughout The Active Equity Renaissance series, we have pointed out the obvious need to overturn modern portfolio theory (MPT) and replace it with something better. How have we done this? By describing the broken 1970s model of portfolio management, enumerating what we call The Cult of Emotion, and declaring the fall of MPT. But what should replace MPT? We first proposed new frontiers of risk...
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The Active Equity Renaissance: Renaissance Portfolio Management

Posted by Jason Apollo Voss on May 17, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments What can we do to inspire the renaissance in active equity portfolio management? Over the course of The Active Equity Renaissance series, we have dismissed the broken 1970s model of portfolio management and the cult of emotion. We also charted the rise and fall of modern portfolio theory (MPT), considered new frontiers of risk assessment, and discussed behavioral portfolio management concepts....
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The Active Equity Renaissance: Behavioral Financial Markets

Posted by Jason Apollo Voss on May 8, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments We have questioned many orthodoxies of modern portfolio theory (MPT) in this series, challenging currently accepted models of financial markets and exploring the decline of MPT and the folly of using volatility as a measure of investment risk. But in undermining the foundations of MPT, what do we propose to take its place? Behavioral Finance Is a More Promising Alternative It is time to move...
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The Active Equity Renaissance: New Frontiers of Risk

Posted by Jason Apollo Voss on Apr 20, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk. This initial error in MPT’s development is a major contributor to active investment management underperformance. Volatility Is Not Risk The concept of volatility as risk rests on a critical assumption that is overlooked by most of the...
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The Active Equity Renaissance: The Rise and Fall of MPT

Posted by Jason Apollo Voss on Apr 5, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments In the early 18th century, Daniel Bernoulli proposed that individuals maximize expected utility when they make decisions under uncertainty. This reasoning launched the rationality model of human behavior that underpins many of today’s theories in economics and finance, including modern portfolio theory (MPT). The mathematical models that sprang from these theories provide a veneer of orderliness...
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The Active Equity Renaissance: Understanding the Cult of Emotion

Posted by Jason Apollo Voss on Mar 22, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments “I know you are afraid and you should be afraid. I will invest you in products that will not stir up your fears.” This sentiment is applied over and over again in the investment industry in one form or another. It is the mantra of what my co-author Jason Voss, CFA, and I call the “Cult of Emotion.” The Cult is so pervasive, investment professionals are hardly aware how it affects virtually...
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The Active Equity Renaissance: Rejecting a Broken 1970s Model

Posted by Jason Apollo Voss on Mar 14, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments The average active equity mutual fund underperforms its benchmark. This statement sparks little controversy and can be applied to active equity hedge funds as well. The story gets worse when the results are AUM-weighted. Collectively, active equity delivers no value to its investors and, in fact, extracts value from them. In our highly competitive markets, what industry can survive if it fails...
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