The Disruptive Active

Abstract

Disruption is happening all the time. And it will happen in the active investing business too. What is active investing? Anything which starts from intraday trading to mutual funds can be bundled as active investing. Anything which is designed to conserve capital (even if it does not) and deliver absolute returns is active. Anything non-standardized using fundamental analysis, quantitative, technical, Behavioural or interdisciplinary studies also would come under the same classification. Anything not Passive can also be called Active. Anything held for a periodic rebalancing of 3 months and higher (say up to 60 months) would be more towards Passive. The clear distinction between the two could be absolute or relative returns, indexed or non-indexed, and shorter or longer holding periods. So where is the disruption? Since Passive is traditionally indexed while Active is considered the domain of experts. Because absolute money management is considered a skill set which needs product knowledge and expertise, Active style is considered primarily discretionary, and generally non indexable. This is where we have the potential of disruption.