What is the biggest sin for an active manager?

In a recent survey, readers of the CFA Institute Financial NewsBrief were asked, "What is the biggest sin for an active manager relative to its relationship to an investment consultant?" 44% of people said that style drift is the biggest sin, followed by 28% who considered underperformance to be the greatest sin.

Why do you think style drift is considered the biggest managerial sin by investment consultants? What do you think is the biggest sin?

 
Best Response

Why style drift? Because ICs are allocating a portion of their client's assets to you to fill a specific need. You aren't the only manager they allocate to so when they use you to get International Value exposure, that's what they want to get. They have other managers filling the other buckets (International Growth, Large Cap Value, etc etc.. however they break down their allocation buckets), so they don't want to see drift towards growthier names from their value guy. This is the general idea behind it. Underperformance in your style can often just be a case of your style being out of favor (ie. value in a growth cycle), although performance is always important

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