Passive and Semi Passive managers are only controlling for benchmark and volatility risk. To the extent that active managers are also controlling for the risk of loss of capital they will generally take less risk and thus generate lower returns - by design. Thus the argument that active can’t beat passive is mis-specified. The closer we move to the underlying investor the more important it is to control for risk of loss of capital rather than risk of loss of job and thus the more value can be added by active managers.

Markets are range trading, with traders reducing exposure ahead of a likely volatile summer. Currency markets in particular are looking for catalysts for directional moves to come from politics, with Europe, the UK and the US all having Elections in the coming months. The biggest tail risk we see is from a New White House revisiting the Plaza accord or 1985 and actively talking down the Dollar. Interestingly, while the currency traders are not about talking this at the moment, some of the obvious tail risk hedges - diversification away from $ assets, EM, Gold, Commodities - are already starting to perform.