Investment Team
Daniel WanzenbergPortfolio Manager, Head of Manager Research
My 30 year career has focused on studying the behavior of active equity managers. In 2005, as the head of ABN Amro’s North American global multi-manager program, I posed the following question: in an industry filled with some of the brightest and most highly credentialed people in society, why do so few equity managers outperform passive benchmarks?
What I discovered is that it is not the lack of manager skill but an inefficiency in how stock selection skill is typically harnessed and delivered to investors.
Specifically, active equity portfolios are often constructed too broadly and include “filler” or “alpha drag”. Research shows that equity portfolios often derive outperformance from just a few sectors; however, for diversification and risk control purposes, most portfolios include securities where no persistent stock selection skill exists. This active management dilution often produces passive-like returns and risk, with active fees.
By strategically selecting holdings only from sectors where managers had a proven track record of outperformance, I believed that we could avoid this dilution effect and capture better returns without sacrificing diversification.
In 2009, I set off to build a new company based on this innovative idea. At Portfolio Solutions Group, we’ve built a system to find and utilize the consistent stock-picking talents of managers in specific sectors. We do this by sifting through thousands of funds to identify sector portfolios with consistent outperformance. Then, we extract the holdings chosen by managers who have consistently demonstrated superior stock selection within each sector. Finally, we use rigorous portfolio construction techniques to strategically integrate these proven sources of excess returns (alpha) into a strategically diversified alpha-driven portfolio.
What I discovered is that it is not the lack of manager skill but an inefficiency in how stock selection skill is typically harnessed and delivered to investors.
Specifically, active equity portfolios are often constructed too broadly and include “filler” or “alpha drag”. Research shows that equity portfolios often derive outperformance from just a few sectors; however, for diversification and risk control purposes, most portfolios include securities where no persistent stock selection skill exists. This active management dilution often produces passive-like returns and risk, with active fees.
By strategically selecting holdings only from sectors where managers had a proven track record of outperformance, I believed that we could avoid this dilution effect and capture better returns without sacrificing diversification.
In 2009, I set off to build a new company based on this innovative idea. At Portfolio Solutions Group, we’ve built a system to find and utilize the consistent stock-picking talents of managers in specific sectors. We do this by sifting through thousands of funds to identify sector portfolios with consistent outperformance. Then, we extract the holdings chosen by managers who have consistently demonstrated superior stock selection within each sector. Finally, we use rigorous portfolio construction techniques to strategically integrate these proven sources of excess returns (alpha) into a strategically diversified alpha-driven portfolio.
Other:
After receiving a B.A. from University of Iowa, I started my career as a performance analyst at Nuveen Asset Management. I joined Envestnet at its founding in 2000, and helped build their investment manager platform. From 2007 – 2023, I served as Head of the Investment Committee at The Coleman Foundation and was responsible for overseeing its $200 million portfolio.
Samuel SchermanAnalyst, Portfolio Specialist
Sam’s passion for investment management began in 2012, inspired by Michael Lewis’ book “Moneyball.” The book’s exploration of data-driven decision-making in baseball resonated with Sam, akin to Jonah Hill’s role alongside Brad Pitt in the film adaptation. This inspiration led Sam to dive deeply into probability theory and sports analytics, where he developed a methodical and systematic approach, emphasizing the importance of avoiding emotional biases and focusing on data-driven decisions. After college, Sam served as the Director of Analytics at Daily Fantasy Sports (DFS) Karma, where he was responsible for creating simulations, projections and data-driven content for major leagues like the PGA, MLB, NBA, and NFL. Seeing the parallels between sports analytics and portfolio analysis, Sam joined Dan Wanzenberg at the predecessor to Portfolio Solutions Group in 2016, starting as an Intern and progressing to Senior Analyst and to his current role as Portfolio Specialist. Similar to evaluating sports metrics, Sam analyzes the performance of money managers, focusing on factors like alpha, attribution, and risk statistics to identify and combine manager skill in specifc sectors. Sam leads the analytics effort on the team and is responsible for managing the technology suite of models used throughout the process. As a Portfolio Specialist, Sam continuously looks for small advantages that, when combined, seek to enhance overall portfolio performance. Sam received a B.S. in Finance at Miami University.