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The Habits and Hallmarks of Great Investors

Great Active Investors: How to find them

What are the habits of great fund managers, and how can they be selected from the crowd?  From Mauboussin's seminal paper on great investors' top 10 attributes, to insight from the CFA Institute Research Foundation on the manager selection process, the papers below aim to provide answers.

Other papers discuss the topic of luck vs. skill in manager performance, forces within the industry that are making it tougher on active investors, and whether performance differences exist between male and female fund managers.  And, if you're curious about the likelihood of consistent alpha generation for funds within a specific sector, take a look at the Persistence Scorecard produced by S&P Dow Jones Indices.

great investors

3 Habits of Highly Effective 'Active' Investors (BlackRock, 2019)

For compliance reasons, this paper is only accessible in certain geographies

Strategists at BlackRock reflect on exactly why indexing matters, given the ongoing shift to index strategies by investment management professionals.

Reflections on the Ten Attributes of Great Investors (Michael J. Mauboussin, Aug 2016)

Based on his vast investment industry experience, Michael Mauboussin shares his wisdom on the 10 key attributes of great bottom-up investors in this 20-page research note.

Hallmarks of Successful Active Equity Managers (Cambridge Associates)

What steps can institutional investors take to increase their chances of selecting such a high-performing active equity manager? This 20-page report from Cambridge Associates suggests key attributes to look for.

Not All Active Managers Are Created Equal (Columbia Threadneedle)

What makes a great investor? The authors of this paper examine the key factors that generate sustained active investment alpha.

Does Past Performance Matter? The Persistence Scorecard (S&P Dow Jones Indices)

The only way to separate skill from luck for a portfolio manager is by demonstrating the ability to repeatedly outperform their peers. S&P Dow Jones Indices explores the issue of persistence amongst portfolio managers.

Manager Selection (CFA Institute Research Foundation, 2013)

This comprehensive book helps investors to sharpen their manager selection ability, reviewing the process for manager selection for different mandates, including active, passive and alternative funds.

Skill vs. Luck in Private Equity Excess Returns (The Carlyle Group, 2017)

The Carlyle Group presents an analysis of skill vs luck regarding limited partners' ability to select private equity funds and stresses the importance of a highly disciplined due diligence process.

Selecting Fund Managers - What Do Trustees Look For? (Aon Hewitt, 2017)

This 11-page paper is a collaborative effort between Aon Hewitt and Leeds University Business School. It examines the relationship between trustees and their fund managers and investment consultants.

Active Share & Active Management: Skill, Conviction, Opportunity (CFA Institute)

This article by Martijn Cremers, Professor of Finance at the University of Notre Dame (Indiana), relates Active Share to the fund manager's individual stock-picking skill, conviction, and opportunity.

Diversifying Well: The Most Important Investment Strategy (Ray Dalio, 2019)

In this LinkedIn post, Ray Dalio explains why portfolio diversification is the most important things an investor needs to do in order to invest well.

Market Efficiency: Who is on the Other Side? (Michael J. Mauboussin, 2019)

When trading, knowing the specific source of the inefficiencies that you are trying to capitalize on is important. This paper categorizes market inefficiencies as either behavioral, analytical, informational, or technical.

How Asset Managers Can Win in a Winner-Takes-All World (Boston Consulting Group, 2019)

BCG examines the structural forces that are putting downward pressure on asset management profitability. They argue that a challenging period such as this will generate clear winners and losers, and the authors suggest two distinctive business strategies for getting ahead of the competition.

Long-term investing in public equity markets: what does success look like...and how to organize it? (The 300 Club, 2018)

Following on from another article by 15 Dutch CIOs entitled 'Short-term profit or long-term value creation?' this paper attempts to address the issue of what defines success for the long-term investor.

Buffett's Alpha (Financial Analyst Journal, 2018)

Are Warren Buffett’s extraordinary investment returns more attributable to skill or luck? This study breaks down why Berkshire Hathaway has significantly outperformed the stock market and concludes that Buffett’s success appears not to be luck but it largely explained by his focus on low-volatility, high-quality, and cheap stocks, amplified by uniquely cheap access to leverage.


Fund Managers by Gender: Through the Performance Lens (Morningstar, 2018)

When looking at the performance of actively managed US funds since 2003, this study finds that there is no performance difference of significance between male and female portfolio managers.

Do Alpha Males Deliver Alpha? Testosterone and Hedge Funds (2018)

The authors use a measurement of facial structure for male hedge fund managers as a proxy for testosterone levels, then regress this ratio against their risk-adjusted performance, with some very interesting results. Alpha generation may be less likely for 'alpha male' managers.

Why It Matters That There Are So Few Female Fund Managers (Columbia Threadneedle)

Globally, only 7% of funds are managed by women, accounting for just 4% of assets. This 10-page paper by Columbia Threadneedle discusses the lack of women in the fund management industry.