Olsen told delegates that making many small gains on a relatively large number of stocks could be just as legitimate a strategy as investing in a smaller number of stocks and holding them for the long term, as long as the manager had a disciplined investment process.

In fact, it was a strategy particularly suited to current conditions on stocks markets where beta (or the movement of the market) would not necessarily be a reliable provider of returns in the future.

“We are not shy of high turnover strategies, particularly in volatile markets,” Olsen said.

“We think it has the ability to give you more excess return.”

Olsen likened the difference between the high turnover manager and the deep value manager as the difference between the supermarket giant Woolworths and bionic ear maker Cochlear. The first generated high net profits by making small profits on many thousands of different products while the second company had only a few products but made high margins or profits on each one sold.

When evaluating fund managers, Olsen said it was van Eyk’s job to strip out the differences between the two approaches and isolate the “information coefficient” or the manager’s skill at turning each investment decision into a winner.

Michael McCorry, chief investment officer at Blackrock, spoke as an advocate of the high turnover, low margin approach but also counseled investors and advisers in the room that they should free managers from the long-only constraint and allow them to “fully express” their view on a stock by shorting it if necessary.

“If you love a stock you want to be three per cent overweight, if you hate a stock you want to be three per cent underweight,” McCorry said.

This was especially valuable with small companies where it was often impossible to express an adequately negative view of a stock by being underweight.

“(In long-only investing) the most you can do is not hold the stock,” McCorry said.

If the stocks was one per cent of the index for example, it was impossible to be three percent underweight the stock without using shorting.

“The more active risk you take (in a portfolio) the more the long-only constraint holds you back,” he said.

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