Active and Passive Investing

Which Active Managers Are More Likely to Outperform? Simple systematic rules offer limited help in picking winning managers Favoring past winners can make sense, even if performance-chasing flows may be excessive. There is some evidence of active managers' alpha persistence Various academic surveys* discuss this and other helpful characteristics. However, there are few uncontested systematic results in the literature Some evidence may reflect reporting biases (survivorship, backfill,...), e.g., the sometimes-claimed edge of smaller and younger funds While there are few uncontested results, it is worth noting that this line of academic research focuses on relatively simple, publicly available information ● ● Access to private information and proprietary analysis may materially raise the odds of choosing outperforming managers Most credible manager selection services put very little weight on the simple measures used in the literature. The main weight in due diligence is often on highly subjective components (AOR I'VE GOT IT DOWN το FOUR ROBERT 7 Funds -Eeny -meeny miney moe FOOOOOO EDA on *Jones-Wermers (2011), Jones-Mo (2017), Bollen-Joenvaara-Kauppila (2017) us Source: AQR, Robert Thompson Cartoons. For illustrative purposes only. The 247/635s and pictures is for informational purposes only and is not authorized by, sponsored by or associated with trademark Please important disclosures in Appendix. 11

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