Investing with an active approach
Active investing is no longer defined solely by security selection and deviation from a benchmark index, but increasingly by how investment insights are captured, combined and integrated, and most importantly why. Today's professional investors are focused on understanding how to achieve targeted and repeatable above-market returns in formats that are aligned with their objectives, constraints and governance frameworks.
Results-oriented solutions
This evolution reflects a more pragmatic and results-oriented approach to portfolio construction at all levels, as well as the move away from traditional asset class labels in favour of a goal-driven approach. Investors are structuring the risk/return profile of their portfolios by focusing on outcome-oriented strategies, from seeking income to defending against more complex market phases. Among the main drivers of this change are increasing longevity and an ageing population. These dynamics are fuelling demand for lifecycle planning solutions geared towards specific objectives, such as the ability to meet future commitments.
A more active risk-oriented approach
One might expect a more results-oriented market to increase demand for active solutions. However, long-term fundamental investors now account for only 15% of equity flows in the US, compared to more than three-quarters before the Global Financial Crisis. This reflects investors' growing scepticism towards active management, a consequence of the failure of several professional investors to consistently outperform their benchmark indices in the post-Global Financial Crisis era. This difficulty, however, should not discredit the concept of active management. Investors should seek to understand whether the risk taken is appropriate within the context of their portfolio, in relation to their objectives and in the market environment, and how it might be managed as circumstances evolve.
Modular Approach and Discipline
In this context, active investing is becoming more 'modular', which fosters greater transparency and more robust governance, as it becomes easier to attribute results to specific exposures when these are designed around explicit objectives and defined risk budgets. Portfolio construction has become a more visible and verifiable component of the investment offering, alongside instrument and strategy selection. In line with this scenario, the demand for structured portfolio solutions as building blocks is increasing, with investors expecting a wider range of options and a higher level of granularity among them.
In addition to the growing demand for greater granularity, investors' interest in approaches that can combine depth of research with systematic discipline is also on the rise, as this combination offers repeatability, transparency and explicit control over risk exposures.
One of the main drivers of the evolution towards more modular investment models and an increasingly customised approach has been the emergence of a neutrality with respect to 'wrappers'. What matters is the ability of the underlying portfolio to reliably generate expected results and to be efficiently integrated into existing portfolio structures, reporting systems and governance models.
Skills serving objectives
The ultimate goal is clarity. Investor needs are increasingly heterogeneous, influenced by different objectives, regulatory frameworks and governance requirements. Meanwhile, the economic environment has become more uncertain, making the investment process more complex. Consequently, the ability to provide insights for specific purposes and supported by verifiable processes has become essential to improve investors' understanding of and confidence in the real drivers of performance. Our focus is on applying investment expertise across multiple dimensions, combining fundamental and systematic approaches and extending active insights beyond security selection, into portfolio construction and implementation. This breadth of expertise and the ability to customise allows clients to access proprietary research insights in ways that are in line with their specific needs.
The difference is, increasingly, in the details.
Important information
Investors should be aware that the views provided here may no longer be current and may even have already been changed.
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