the fired beat the hired. Mark Hebner discussed it in his book Index Funds:Can't recall which book it was, maybe a Swedroe book, but frequently once a manager has had 1-2 mediocre years, he knows to save his job he needs to get to a certain ROI, so the risks for him are not much, either do it or risk your job, the risks for the investors are exponential. 3 years is about the timespan for a manager to prove his worth in this line of work. The interesting thing was once a manager has 3 nice years, the next 3 are statistcally going to be bad, and the inverse is true, once a manager has 3 poor years, he's likely to outperform the next few years. So the cycle of firing guys who underperform and hiring guys who outperform is vicious for investors. IIRC, this example was with pension funds more so than just run of the mill brokerage houses like EJ/Ameriprise/Chase etc etc. Several of the larger state pension funds are facing incredible shortfalls.They are forced to buy risky investments that involve market timing … hence why we are BHs with index funds.
Statistics: Posted by arcticpineapplecorp. — Thu Jan 11, 2024 8:52 pm — Replies 81 — Views 5044