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PGIM: The impact of market conditions on active equity management

PGIM Chief Strategy Officer Taimur Hyat discusses active investing with Bloomberg Markets. Since the financial crisis, investors have enjoyed generally benign conditions, with subdued volatility and strong markets, but active equity managers have remained under pressure. PGIM, Prudential's $1 trillion global investment management business, says investors should not be surprised; history has shown a strong pattern of counter-cyclicality in manager excess returns relative to the equity markets.

The Impact of Market Conditions on Active Equity Management takes a close look at the relationship between equity market conditions (defined by market returns, volatility, and dispersion) and active equity manager results. Focusing on the U.S. large cap space, PGIM's Institutional Advisory and Solutions team analyzed more than 20 years of manager and market data to determine which set of conditions are associated with more or less favorable results for active equity managers.

Key conclusions:
  PGIM's perspective seeks to provide investors with a better understanding of the relative importance of changing market conditions and the need to bear in mind that they can, and do, shift. There is a market for passive and active management, not one versus the other. PGIM’s focus is on helping long-term investors understand the dynamics and the fit of active management in their portfolios.

Read or download The Impact of Market Conditions on Active Equity Management. Hear PGIM Chief Strategy Officer Taimur Hyat discuss the paper. To speak with Hyat, or the paper's author, PGIM Managing Director Karen McQuiston, contact Judi Flynn.