Top-Returning Lyrical Explains How Active Managers Can Succeed

There is a stock picking dilemma that is vexing Andrew Wellington, founder and chief investment officer at Lyrical Asset Management. Their top-ranked stock picking ValueEquity-EQ fund was up 18.1% net in 2017 after turning in a 16% return in 2016. The hedge fund which was founded in 2009 has  produced at least 13% net returns every year since then bar 2011 and 2015.

Indeed, the hedge fund notes in the letter:

Lyrical remains the top performing manager amongst our broad, value-style peer group. We use eVestment’s database to compare our returns to the returns of all Large Cap, Mid Cap and All Cap Value products. While not all of these products are our true peers, we want to cast a wide net in capturing the performance data. In total, as of January 30, 2018, there are 530 products in those three categories that reported returns for all years since our 2009 inception. For that superset universe, the U.S. Value Equity-EQ composite ranks in the top 1%. Additionally, for the past 5 years and 7 years, our composite also ranks in the top 1% of that universe.

What piques Wellington’s curiosity is in “beating an index,” a topic to which he gives meaningful thought towards in his 2017 year in review.

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