Stop me if you’ve heard this before: It’s going to be the year of the active picker.
It’s not hard to find Wall Streeters who are both bullish on the market, and bullish on active managers’ ability to beat it.
After a rough few years where mutual funds and hedge funds underwhelmed, 2017 could see a “nirvana for active managers,” according to Morgan Stanley.
“This environment is undoubtedly better for active investing,” Third Point founder Dan Loeb wrote in a letter to clients. We could be reaching “the inflection point” where active managers start to outperform index funds, according to Seth Masters, the chief investment officer of Bernstein Private Wealth Management.
Well, it’s not just the fund managers hoping to benefit from a return to form. A reversal in fortunes also bodes well for the investment banks that serve those investors.
Goldman Sachs CEO Lloyd Blankfein said in his annual letter to shareholders that, yes, hedge funds and active managers could be in for a better 2017. That could also support client activity, benefitting firms such as Goldman. Call it a win for Wall Street.
Here the extract:
“We have a diverse client franchise, and one area of particular strength has long been our standing with the hedge fund community. Our product diversity, global footprint, world-class prime brokerage capabilities, and engagement strategy based on content are of particular value to hedge fund clients.
“Over the past few years, we also have made it a key priority to deepen relationships with more traditional asset managers. As an example of our progress, we have seen market share improvements in our U.S. cash credit
businesses, where asset managers have historically been active.
“Both hedge funds and active managers could face a much different and more attractive market environment in 2017. To the extent decreasing market correlations translate into a better backdrop for generating outsized performance, that should also support increasing levels of client activity.”