The Death of Active Management?
A full version of this article originally appeared in PREA Quarterly, Summer 2015
The active money management community has seen its alpha generation progressively diminish as the decades have passed. No single explanation exists for the diminished alpha, but the most popular seems to be that the information revolution has caused the market to become much more efficient. Computers, the Internet, 24-hour news channels, social media, and a slew of other innovations have completely altered the daily routine of most investors. If this democratization of information is truly the root cause of eroding alpha, then the days of active management may be numbered.