Northern Trust Asset Management examines why institutional equity portfolios often fail to deliver intended outcomes, focusing on hidden risk exposures and portfolio construction decisions. Drawing on analysis of over $200 billion in assets, the paper argues many investors unknowingly take inefficient risks, leading to index-like returns despite active management and higher fees.
The Risk Report
Northern Trust
Research
19 Pages
Key Takeaways
Uncompensated Risk Dominates: Portfolios held nearly 2x more uncompensated than compensated risk across 200+ portfolios, limiting excess return potential despite active strategies.
Scale Of Analysis: Study spans $200B+ in assets across 1,000+ strategies and 64 institutional investors, highlighting consistent structural inefficiencies across large, complex portfolios.
Index Like Outcomes: Conventional active approaches frequently delivered benchmark-like returns with higher fees, suggesting weak differentiation despite widespread use across institutions.
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