Key takeaways
- Generating alpha is not just about expressing conviction but making active risk more intentional.
- It has become as much about building resilience as about generating short-term performance.
- Active strategies today take many forms, from systematic approaches to traditional discretionary strategies.
Active management is changing in response to evolving markets and investor demands.
Active management is entering a decisive phase. After years of adjustment in the face of cost pressures linked to the rise of passive investing, the industry is now being reshaped by investor intent: how to navigate uncertainty, generate resilient outcomes and build portfolios that can adapt as market regimes shift. The way investors think about alpha is therefore evolving.
Demand for active management remains anchored firmly in the need to deliver income, growth, and stability.
However, rather than viewing alpha solely through the lens of unconstrained stock selection, investors are increasingly focused on how research insights can translate into broader portfolio outcomes. Active management now encompasses more than simply outperforming a benchmark in isolation.
Why active matters again: Disruption and dispersion
This shift must be put in context of economic fundamentals evolving at an unprecedented rate. AI is reshaping productivity trends and competitive dynamics across sectors and regions, while geoeconomic fragmentation is rewiring of global supply chains and capital allocation decisions. Economic cycles have therefore become less synchronised, while uncertainty around growth, inflation and interest rates has increased.
As a result, valuations are diverging meaningfully as expectations adjust rapidly and the gap between perceived leaders and laggards has widened. This creates a richer opportunity set for asset managers who can assess fundamentals rigorously and position portfolios with discipline. However, as market dynamics, including those surrounding asset class correlations, have become more complex and less linear, investors are also becoming more focused on how they can build resilience into their portfolios.
At its core, investing still comes down to three interconnected choices: where to take risk, how much risk to take and how to take it, but answering these questions in today’s environment requires greater cross disciplinary expertise, more in-depth, forward-looking research, and a clearer understanding of each investor’s objectives and constraints. Only then can clarity and relevance around the drivers of risk and return be delivered in a way which supports confidence through changing market regimes.
Redefining alpha in practice
Broad market exposures continue to play an essential role in providing efficient access to market beta, but these must now be complemented by active strategies that can help manage risks and capture opportunities that arise as fundamentals evolve. In this context, active management has become as much about ensuring resilience through customisation as creating wealth through selective exposures. Likewise, research driven insights are less about delivering constant outperformance and more about enhancing long-term portfolio outcomes.
That said, active strategies today can take many forms. From systematic to more traditional discretionary approaches, they can be balanced for efficiency, transparency and control, and implemented through a range of vehicles. The objective is not to determine a level of conviction, but to make active risk more intentional, measurable and aligned with broader allocation decisions.
As an example, we are experiencing rising client interest in disciplined systematic solutions which can provide benchmark aware exposures while also embedding value-adding research signals. Such strategies can consider the potential for tracking error during portfolio construction, allowing clients to manage the extent to which they accept market-relative risk.
On the other hand, we are also seeing renewed interest for high-conviction solutions that can take larger index-relative positions to address specific challenges presented by current market conditions. These include the growth of certain thematic and idiosyncratic stock-level risks resulting from higher market concentration within a handful of dominant and often correlated mega-cap stocks, the subsequent reduction of inherent index diversification, and the impact of sentiment and momentum-driven flows on short-term return dispersion. Elevated dispersion, in this sense, is a feature of markets that must be managed and harnessed simultaneously through thoughtful portfolio design.
"While research remains the foundation, value lies in blending exposures with selective alpha sources."
Designing alpha-driven solutions
Ultimately, our clients still want to benefit from the value our research provides, as it has been proven to deliver value over extended timeframes. Between the start of 2010 and end of 2025, for example, our global equity research team’s buy and outperform recommendations delivered 56.2 per cent cumulative market-relative performance, while stocks attributed sell and underperform recommendations lagged, on average, by 18 per cent*.
However, each client is different and increasingly wants the benefits of our research delivered in a manner which aligns with their own specific circumstances, objectives and constraints. This is why we are constantly adapting our holistic range of research powered solutions across asset classes so that it can help clients with different risk profiles pursue a range of investment objectives.
The new age of alpha is not defined by opposition to beta, but by integration with it.
Research remains the foundation, but its value will be realised through thoughtful implementation - the ability to blend strategic exposures with selective alpha sources, in reflection of new economic realities.
*Source: Fidelity International, 31 December 2025. Regional returns weighted by market cap of companies rated either buy/outperform or sell/underperform. Value-add calculated versus regional indices.
