Active management - Lessons for investment managers, consultants, and clients.

Most financial markets are mostly efficient most of the the time. Ineffiencies opportunities to;add value dis-proportionate to marginal systematic risk -- appear sporadically and unpredictably. To improve the information ratio, the manager must search constantly and widely for inefficiencies. That is, manager performance depends crucially on broadening manager scope. The author argues that clients and their consultants can help investment managers widen their scope by structuring mandates in ways that are not: currently conventional. Managers can also broaden their scope by organizing themselves as teams with specialist: and generalist portfolio managers who cooperate to diversify across not only countries and currencies but also investment styles. Widening scope should also improve a management team's skill.