Active asset management is changing its approach.
From benchmarks to outcomes
For decades, success was measured by how much a fund outperformed its benchmark. That standard is shifting. Investors now seek solutions tailored to specific goals like retirement income, inflation protection, or capital preservation instead of raw returns.
Samantha Ricciardi, head of EMEA at Fidelity International, stated that the purpose of an active solution matters as much as the ideas behind it. The change requires managers to define each strategy’s role in a portfolio rather than simply chasing excess returns.
The shift reflects broader disillusionment. Before the 2008 financial crisis, long-term fundamental investors drove over three-quarters of U.S. equity flows. Today, they account for just 15%. The decline stems from more than performance—it reflects a loss of trust. Investors no longer accept opaque processes where returns appear without explanation. They want transparency, modularity, and verifiable exposures.
Ricciardi explained that defensive strategies often lag during market rallies, but that doesn’t reduce their value. The focus isn’t on high absolute returns but whether the risk aligns with the portfolio’s objectives. A bond fund designed to preserve capital, for instance, shouldn’t be measured against the S&P 500.
Tools are evolving to meet these demands. Active ETFs, which combine fundamental research with systematic discipline, now capture over a third of demand in Europe. Fidelity’s lineup has expanded since its 2020 launch, showing investor interest in products that blend repeatable processes with contextual interpretation.
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The change isn’t just about flexibility—it’s about survival. A survey of 125 institutional investors and distributors in Europe and Asia revealed that 42% use these funds to access specialized markets, 27% for sustainability goals, and 23% for liquidity. The takeaway: managers who package research into multiple structures—mutual funds, ETFs, private markets—gain an edge.
Demographics are speeding up the transition. Aging populations and longer lifespans increase demand for lifecycle strategies, such as target-date funds, which adjust risk as investors near retirement. These products mix public and private markets, focusing on outcomes like income, downside protection, and liability management.
The macroeconomic environment is also driving change. Structural trends, including artificial intelligence, are reshaping the investment setting. Commodities offer a natural hedge against inflation, which often accompanies strong economic growth, whether through composite indices or individual exposures.
This complexity requires more than good stock picks. Managers must turn ideas into precise, transparent solutions that match investor goals. The future of active management may depend less on beating the market and more on designing portfolios that deliver predictable outcomes—even if those outcomes differ from past benchmarks.
The old approach is fading. The new focus is on clarity, adaptability, and results that matter to investors.
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