Arbor Technology Advisor Co-Authors White Paper on Active Management AI Tools

Arbor Technology Advisory Evan Schnidman has co-authored a new white paper on how active asset managers can use innovative technology tools to compete with passive management, especially considering the lack of performance during the COVID-19 crisis. The additional  two authors, Sean Kruzel and Jeffrey Corrado, are experts in integrating AI into the fund selection process. 

While this paper is aimed primarily at financial advisors, we believe anyone looking to gain a deeper understanding into the technology behind asset management and fund selection can benefit. 

Abstract: COVID-19 has exposed cracks in the foundation of active asset management. Like the financial crisis more than a decade ago, the Covid crisis has highlighted that despite claims that their investment philosophies mitigate downside risk, most active asset managers fail to outperform their benchmark, especially in times of crisis. 

This failure to outperform has driven capital from active to passive. Analysis from Passiv.AI indicates that in late 2009, immediately after the financial crisis, passive ownership spiked by 4.5% of total AUM in just one quarter. This trend of assets moving from active into passive vehicles has continued at every subsequent period of market volatility, especially during and immediately after a significant selloff. We identify early indications that a re-allocation of assets is already taking place in light of the Covid crisis.

Active asset managers are now facing outflows as they struggle to protect investor capital from downside risk. In order to combat this phenomenon, we identify how active managers can use modern technology tools to compete with passive vehicles. The paper concludes by highlighting how active managers can adopt novel technology and methods to enhance research capabilities, streamline their investment process, and increase returns.

Access the full paper here.