Recent market declines make it clear that conventional long-only, long-term-hold investing is a hazardous, and probably non-competitive policy. Moreover, evolution of investment market technology and the introduction of new investing tools require contemporary managers to stay abreast of new developments.
Exchange Traded Funds based on clearly-defined holdings create the reality of "package" investment actions that Mutual Funds previously only pretended to accomplish. ETF operating costs and tax efficiencies reinforce the transparency advantages.
Since present-day market-making competition has driven transaction costs down to insignificant levels, and risk-transfer practices provide great market liquidity, the old inhibitions to active management are largely gone. However, for the successful manager, personal judgments about the investment environment and appropriate allocation tactics are more important than ever.
Additionally, accelerated communications in the investment space deny the old practices of inaction, hoping things will "work themselves out" or perhaps clients won't notice their current negative positions. Active investing is not only very possible, and often more productive, but has become a competitive necessity in the advisor space.
Even though professionals recognize that price and circumstance changes produce dynamic return opportunities through time for a given investment, there is a persistent mythology that the investment vehicle somehow maintains a static risk condition through it all.
Elaborate valuation and portfolio management theories have been propounded ad nauseam asserting their acceptance as a norm. Yet in the test of the marketplace, they fail to perform.
It is becoming obvious to those without a vested interest in this illusion that risk and return are both dynamic and intertwined in a continuously evolving series of risk and return tradeoffs, thus demanding an active approach to consistent and thoughtful evaluation of each, resulting in Active Investment Management.