Active Management Is Common

Approximately 80% of capital in the market is actively managed. That capital is seeking to outperform the market, but many funds are challenged because they are really "closet indexers" that are following not leading the benchmark, because fees charged drag down performance, and because many are highly complex with unclear risks. Within their portfolio, many investors want to diversify their strategies beyond buy and hold, take advantage of no management fees, have clear transparency of risks, and increase their market knowledge to enable better management of their whole portfolio.

Data and Research Enables Active Management

The biggest cost of trading desks and investment houses after salary is data and research. It can be difficult for smaller investors to find good products and many act on investment ideas with no quantitative evidence. Some investors may rely solely on research provided by investment banks who are permitted to simultaneously bet against that same strategy. Eventually many demand additional quality advice and ideas that are independent and scientific. Smaller investors can even the playing field by reinvesting some of their cost savings in the exact same types of tools as the largest investors: data and research.

Past Performance Is the Most Fundamental Data

The primary basis of judging any investment strategy is past performance, including risk as well as return. The problem with live or paper trading a new strategy is it takes one year to gain one year of past performance data. Strategies that can be tested against past data have the huge advantage that you can learn years of performance results in seconds. Quantitative strategies can be backtested like this and thus outperformance can be demonstrated statistically.