« Do active asset-managers create value? »
amLeague clearly says yes, with all supporting evidence.

Through its performance tables, amLeague benefits from premium information: first, asset managers on amLeague are subject to the same guidelines and, are therefore fully comparable; secondly, amLeague only considers portfolios managed in real time on its platform, so that the information is relevant and certified. Especially all trades posted by managers incur the ‘market impact’ of purchases and sales, and also objectively severe standard brokerage fees (15 bp on each transaction).

The study focuses on the flagship mandate, the European equities one (the oldest and most provided by competitors) and the conclusion is unequivocally yes, active managers do outperform passive managers (or benchmarks).

Analyzes were not limited to the raw results of rankings, they also address diverse and varied biases that can possibly affect performance measurements: known biases (the famous ‘survivorship bias’) or less known ones (eg capitalization bias which makes outperformance more and more beautiful as markets rise).

In addition to the ‘yes’ answer (on average, active managers do create value), amLeague underlines that this value creation is not uniform and that active managers give the best of themselves in bear markets. To be clear: not because they might be under-invested (with amLeague, portfolios are ‘fully invested), but because they are more ‘agile’ in terms of sector and securities choices in difficult markets.

Distribution of monthly outperformances

With a battery of statistical evidences (correlations, factor analyzes, tests...), amLeague even manages to quantify its conclusion and provide valuable magnitudes:

In flat markets, the average manager produces an annual outperformance of around 1.6%
In the event of a 10% rise in the market-index, its annual outperformance is about 1%
Active portfolio-managers reach their limits (no more value creation) when the market goes up 25% per year

Market trend

Food for thought for passive management prophets (yes, asset manager do create value) but also for active management marketing teams (pay attention to excessive management fees, which could significantly reduce the gain for the final investor)!

amLeague yet goes further and demonstrates with clear evidence that it is possible to add a ‘layer’ of additional value. Indeed, the results presented above correspond to the average portfolio-manager; but if one makes a careful selection (purely quantitative) of the best managers, the annual gain of 1.6% can easily be increased to 4%. To achieve this result, selection rules are simple, based in fact on construction techniques already practiced by amLeague for several years for its home-made indices.

The upper floor of the rocket then consists in simplifying and making fully ‘portable’ these optimal portfolios. The result, the amLeague_Europe 75 index © finally appears as a portfolio with 75 lines, updated once a quarter, after several days' notice, publicly accessible, just like the CAC 40, FTSE 100, or Dow Jones 30. Again, statistical tools demonstrate both its very close proximity in terms of market behaviour from major classical European indices and the existence of a clear and regular outperformance. What does still remains in favour of large indices?

amLeague_Europe 75 ^© performance

The Holy Grail? Everyone will judge ... But certainly a good way to capture the best of active management value; which can be easily and perfectly ‘encapsulated’ into an index fund or an ETF.

How to go further:

Read the ‘Key Findings’ of our study on www.am-league.com
Complete study available upon demand to nfenard@am-league.com or support@am-league.com
Within 15 days, do not miss our special Newsletter focused on amLeague_Europe 75^© index