Ahead of the Curve: Finding Enhanced Returns in the Information Age

June 15, 2017

The twentieth century saw substantial growth in financial companies dedicated to active investment management. Historically, these managers’ competitive advantage was their access to information, allowing them to make decisions ahead of the curve and fetch higher returns – as well as higher fees.

“Nowadays, in most public markets, that differentiation does not exist,” writes WE Family Offices Managing Partner Santiago Ulloa in his latest article for Forbes. He explains that the tides began to turn in the 1990’s with increased regulatory scrutiny and the proliferation of the Internet. This increased access to information marked the rise of portfolio indexing, ETFs and passive investment, all of which allowed investors to reduce portfolio management costs without sacrificing returns.

Now, recent studies indicate that 85% of active managers are not able to consistently beat their benchmarks or referenced index. Furthermore, it has been shown that other factors like portfolio construction and asset allocation are just as important as a specific set of managers or securities. This leaves investors wondering, where do I find enhanced returns in the age of information?

“In recent years and in the foreseeable future, the best investment opportunities exist in instruments that are not listed and are typically unavailable to the general public,” Ulloa writes in the article. “Currently, the access and ability to analyze these options is one of the greatest differentiators between managers.”

The full Forbes article is available here.