As passive management continues to grow in the U.S., asset owners question when and if the growth could undermine the very foundation of its success. Passive management imitates the collective actions of the rest of the market. A key dynamic to consider in investigating the “when” and “if” questions, is the composition of the active management community and its collective ability to effectively allocate capital and to facilitate accurate price discovery.

This paper explores three elements of diversity in portfolio management, including:

  1. Investment professionals’ varied experiences and backgrounds
  2. The use of factor exposures
  3. Investment professionals’ incentives

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