The Future of Investment Management

138 Pages Posted: 23 Oct 2019

See all articles by Ronald N. Kahn

Ronald N. Kahn

BlackRock, Inc - San Francisco

Date Written: November 12, 2018


Investment management is in flux, arguably more than it has been in a long time. Active management is under pressure, with investors switching from active to index funds. New “smart beta” products offer low-cost exposures to many active ideas. Exchange-traded funds are proliferating. Markets and regulations have changed significantly over the past 10–20 years, and data and technology — which are increasingly important for investment management — are evolving even more rapidly.

In the midst of this change, what can we say about the future of investment management? What ideas will influence its evolution? What types of products will flourish over the next 5–10 years?

I use a long perspective to address these questions and analyze the modern intellectual history of investment management — the set of ideas that have influenced investment management up to now.

One central theme that emerges is that investment management is becoming increasingly systematic. Our understanding of risk has evolved from a general aversion to losing money to a precisely defined statistic we can measure and forecast. Our understanding of expected returns has evolved as the necessary data have become more available, as our understanding of fundamental value has developed, and as we have come to understand the connection between return and risk and the relevance of human behavior to both. Data and technology have advanced in parallel to facilitate implementing better approaches.

With an understanding of the ideas underlying investment management today, including several insights into active management, I discuss the many trends currently roiling the field. These trends, applied to the current state of investment management, suggest that investment management will evolve into three distinct branches — indexing, smart beta/factor investing, and pure alpha investing. Each branch will offer two styles of products: those that focus exclusively on returns and those that include goals beyond returns.

Suggested Citation

Kahn, Ronald N., The Future of Investment Management (November 12, 2018). CFA Institute Research Foundation Publications, November 2018, ISBN 978-1-944960-56-8, Available at SSRN: or

Ronald N. Kahn (Contact Author)

BlackRock, Inc - San Francisco

400 Howard Street
San Francisco, CA 94105
United States

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