Selecting Investment Managers

Abstract

This article explores the relationship between manager quality and future performance and concludes there is only a weak relationship between the two. High quality managers tend to attract capital which acts as a drag on their returns and hence restricts their ability to outperform. Therefore, the most important factor to be considered when assessing managers is unrecognized quality rather than quality alone; there is greatest scope for fund analysts to add value by undertaking research within the universe of smaller managers.