If you’ve been on the receiving end of pitches by asset managers, you have seen something like this: “Our investment team has a combined 138 years of experience.” Let’s think about that.
The assumption, of course, is that more experience is better than less experience, and it is reasonable to think that is the case under most circumstances. However, those who have been around a while know that in frisky markets it often pays — at least temporarily — to not have had the experience at all. Those of us with scars from previous frisky periods have a hard time throwing caution completely to the wind, having seen the results before. The neophytes will have their scars soon enough, but if the cycle has some length to it they can gain assets and fame in size as they ride the new wave.
But for the most part, experience is viewed as a very good thing, thus the marketing construct of adding up the years that the members of the team have been toiling ... continues
In my presentation on “Creativity in the Investment Process,” I have a slide of an empty two-dimensional box (OK, it’s just a poorly-drawn square). The box has a label, which is soon revealed:
As I say, “This is the box that we are in.”
We have come to view “consistent and repeatable process” as the Holy Grail of investment manager selection. The phrase has become the descriptive standard most used by those who evaluate managers, so that if you interact with consultants or financial advisors, you are bound to hear it frequently.
It’s nice in theory, but there’s a big gap between theory and practice. First off, process is way messier in most cases than those diagrams of process in pitch books and on websites would have you believe. Which parts, specifically, are consistent? How are they repeatable? What kind of sludge tends to get into the gears of the finely-honed machine, even if we don’t notice it much of the ... continues
Later this week, Financial Advisor and Private Wealth magazines will host the third Fiduciary Gatekeeper Research Manager Summit. As the agendaFinancial Advisors | There are links to much more information about the conference in the left-hand column of this site. indicates, almost all of the day-and-a-half affair is made up of “Concurrent Individual Portfolio Manager Sessions.”
In addition, although the schedule doesn’t indicate how or when, those named to Financial Advisor‘s 2013 All-Star Research Managers team will be honored during the event. I’m sure that the honorees are all worthy — and I am a regular reader of Financial Advisor — but it’s time to look at conferences and awards like these with a critical eye.
Like other subscribers, I got an email from the editor of FA earlier this year, inviting me to nominate people for the all-star team. Unfortunately, there was no description of the criteria on which potential nominees ... continues
The last two postings have looked at “the paradox of choice” at work in the world of investment products. The first sketched out a couple of basic principles from the book with that titlethe research puzzle | It was authored by Barry Schwartz. and the sequel gave some advice about how to proceed as a buyer of such products given the overwhelming number of offerings from which you could choose.the research puzzle | I called the search for good active managers “this most difficult game.”
Now we turn our attention to the creators and managers of products and what they should do to succeed in this very competitive environment. An important question must be addressed first: How much is the market for investment products going to change over the next five, ten, or twenty years?
Despite the mountain of evidence that would argue for taking a passive approach to investing, most asset owners still invest predominantly with active managers. Supplying those ... continues
The last posting looked at some of the key insights found in The Paradox of Choice by Barry Schwartz.the research puzzle | The book was published in 2004. I compared “satisficers” and “maximizers” to believers in passive management and active management, respectively, which struck a chord with a number of readers.
As promised at the end of that piece, this is the first of two more to follow that will continue to examine the implications that stem from the “dizzying selection” of investment products extant. Today we will focus on what the environment means for the buyers and owners of those products; next up will be some recommendations for the creators, sellers, and managers of them.
The most basic question for those hiring investment managers and advisors is the one identified in the first posting: Should you be a maximizer or a satisficer? The former demands lots of work and considerable skill in selection, while the latter requires ... continues