Spotlight on Robert Lehnherr, Head of Quantitative Equity Research, Northern Trust Asset Management
Global Thought Leader Spotlight
Robert Lehnherr, Head of Quantitative Equity Research, Northern Trust Asset Management
In my role as the Head of Quantitative Equity Research at Northern Trust Asset Management, I am responsible for leading the firm’s Quantitative Active Equity Research and Product Development programs.
The Evolution of Passive Investing
A passive investor is one who uses a rules-based index to achieve exposure to a specific segment of the market. Typically, passive investors are not making active decisions on the specific securities they buy and sell, and they tend to have a focus on transparency and cost management.
One of the biggest evolutions in passive investing has been the expansion of indexing options. New providers have come on the scene and there are more nuanced index exposures now than there were a decade ago. The evolution has really moved beyond a market-cap-weighted benchmark toward a broad variety of index construction options such as factor-based, ESG and thematic indexes.
One of the challenges that may not be recognised is that as the options increase, investors must make an active decision when choosing an index for their passive investment. This is an area where asset managers can add value to institutional investors.
For example, we often work closely with clients and index providers on opportunities to co-develop indexes and strategies. At the end of the day, the goal is to meet client needs around performance, transparency, tracking error and overall cost.
Implications for Institutional Investors
The biggest challenge for institutional investors confronted with more choices is not just about choosing their preferred methodologies, but rather understanding from where returns and risk are derived from and where to get those exposures.
I think the key thing investors need to be aware of is to not take labelling and naming conventions at face value, but rather to understand the nuances. One example that comes to mind is listed infrastructure. This asset class has evolved thematically over the last 15 years from what was essentially just “glorified” utilities to the inclusion of all types of infrastructure. The key development is in how index providers have been able to classify the infrastructure companies. Fifteen to 20 years ago, active managers had an informational edge that enabled them to access pockets of the infrastructure complex that passive indexes were not capturing.
Today we are seeing index providers increasingly developing more nuanced, sophisticated ways of developing those classification systems to deliver the exposure that specific investors are looking for.
Robert will be presenting at Global Investment Institute’s upcoming Equities Investment Forum, taking place on Wednesday, 11 September 2024 at the Grand Hyatt Melbourne, Victoria.
To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Robert Lehnherr, Head of Quantitative Equity Research, Northern Trust Asset Management
Rob is the Head of Quantitative Equity Research at Northern Trust Asset Management. He is responsible for leading NTAM's Quantitative Active Equity research and product development programs.
Prior to joining Northern Trust, Rob was a quantitative research analyst at Allstate Investments, LLC., where he worked as a member of the asset allocation research team.
Rob received an MBA from the University of Chicago as an Amy and Richard F. Wallman Scholar with concentrations in Analytic Finance and Econometrics and has a bachelor's degree from the University of Iowa in Computer Science. Rob is a CFA charterholder and is a member of the Chicago Quantitative Alliance (CQA).
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