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.
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Strategists at BlackRock reflect on exactly why indexing matters, given the ongoing shift to index strategies by investment management professionals.
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.
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.
What makes a great investor? The authors of this paper examine the key factors that generate sustained active investment alpha.
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.
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.
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.
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.
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.
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.
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.
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.
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.
GENDER IN FUND MANAGEMENT
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.
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.
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.