RT Journal Article
SR Electronic
T1 Chasing Performance and Identifying Talented Investment Managers
JF The Journal of Investing
FD Institutional Investor Journals
SP 52
OP 64
DO 10.3905/joi.2018.1.067
VO 27
IS 1
A1 Robert Ferguson
A1 Anna Agapova
A1 Dean Leistikow
A1 Joel Rentzler
YR 2018
UL https://pm-research.com/content/27/1/52.abstract
AB A common refrain from investors is that they have bad luck in hiring investment managers. Their managers’ post-hire performance tends to be disappointing relative to their pre-hire performance. This may be because of performance-based hiring and firing. The literature documents the practice of chasing performance. This article illustrates that the probability that a talented manager’s performance will exceed the best in a pool of untalented managers can be surprisingly small, even for long time periods; hence, chasing performance is unlikely to result in choosing the best managers. This article also provides a framework for mitigating the detrimental effects of chasing performance.TOPICS: Performance measurement, portfolio theory, portfolio construction