Active Investors Trying to Compete by Getting Small

As passive investing continues to gain momentum in the marketplace, a recent Bloomberg article suggests that active investors might find a “lifeline” in smaller, more focused portfolios. “Institutional investors are raising their allocations to so-called focused strategies–” the article reports, “–defined as portfolios holding 50 names or fewer—and distributors are increasingly recommending them to clients.” The findings came from a study conducted by Greenwich Associates in conjunction with Fred Alger Management Inc. that analyzed funds flow… Read More

Long Term Champ Sequoia Fund Shows the Risk of Ultra High Portfolio Concentration

The Sequoia Fund, managed by proteges of Warren Buffett, highlights the risks of focusing on just a few stocks.  Although it has one of the best long-term records of any actively managed mutual fund, two of its directors recently retired because a big bet on just one stock, Valent Pharaceuticals, turned out poorly. The tradition of an “under-diversified” portfolio, however, includes some big wins. Benjamin Graham’s investment in Geico in the mid-1970s is an example.… Read More