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The 3 pillars of active management outperformance

In this paper we dive into the three key factors which define high-potential funds, namely:

  • Concentration: Successful active managers have concentrated portfolios that differentiate them from the broader market. R
  • Patience: Long-term success requires patience. Active funds with extended Fund Duration, typically holding stocks for at least two years, tend to outperform their peers by nearly 2% annually. Impatient managers who frequently trade often underperform.
  • Discipline & Structure: Many funds lack the necessary structure to weather short-term underperformance. Investors must be prepared for drawdowns to benefit from long-term returns, as exemplified by stocks like Apple and Amazon.

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Montaka research paper: 3 Pillars of Active Outperformance \