Debunking Some Myths of Active Management

Abstract

Too often, active managers promote their services in ways that help perpetuate a number of myths and misconceptions about active management. These include the confusion of alpha with beta, skill with luck, expected return with realized return, and style bets with true active bets. Managers sometimes also claim to be absolute return investors, neglecting to note that all active management is about adding value relative to some sort of investable benchmark. The authors address these and other misconceptions.