In June 2015, CBIS published “The Importance of Conviction”, a white paper that reviewed the state of active equity management using data through yearend 2014. The analysis showed that successful long-term records for active managers typically include lengthy periods (often consecutive years) when returns are well below the benchmark and in the bottom quartile of peers. To achieve long-term outperformance, investors must remain patient and stay the course through these rough patches. A skilled investment strategy may require a complete market cycle, which can extend five years or longer, to show the desired results. In fact, the current half-cycle has endured by means of massive global central bank support for a near-record eight years, measured from the March 2009 low. Here we update and expand upon several themes developed in the Conviction paper.
