RT Journal Article
SR Electronic
T1 No Fear of Commitment: <em>The Role of High-Conviction</em>
               <br/>
               <em>Active Management</em>
JF The Journal of Investing
FD Institutional Investor Journals
SP 7
OP 22
DO 10.3905/joi.2014.23.3.007
VO 23
IS 3
A1 Laurence B. Siegel
A1 Matthew H. Scanlan
YR 2014
UL https://pm-research.com/content/23/3/7.abstract
AB Although the theory of active management suggests that breadth is the key to a high information ratio (IR) and thus success in active management, high conviction is another route to a high IR and one at which most investment management firms are more likely to succeed. High-conviction active managers are those that develop forecasts for a small number of securities that they are willing to hold in substantial weights. Such “concentrated active” funds deserve serious consideration by investors building broadly diversified portfolios of managers. The authors indicate how one might conduct the fundamental analysis leading to high-conviction portfolios. The principles discussed apply equally to long-only and long–short portfolio structures, although long–short investing involves risks (and thus risk-control disciplines) that long-only managers need not worry about.TOPICS: Fundamental equity analysis, portfolio construction