26/10/2016
Experienced managers do not necessarily produce better returns
Experience is valuable in many professions. But for fund managers, it is not synonymous with better performance, a study by the Cass Business School sponsored by Banco Inversis finds.“The Performance of Long-Serving Fund Managers” examines the performance of a sample of 357 US equity funds in the United States managed by a single manager over at least 10 years (from January 2005 to December 2014).The group of experienced managers produced “relatively impressive” returns before costs compared to their benchmark indices: about 0.40% pa over 10 years. This is a relatively high level compared with the results from other studies, the document says. However, when studying the performance of these experienced managers, the study finds a deterioration in the risk-adjusted outperformance over time. In addition, it found no evidence that performance persists year over year.For investors who nonetheless prefer to invest in funds which are managed by a longstanding professional, the study finds that funds with particular charactersitics have earned higher risk-adjusted returns over time: those with lower fees, which are concentrated, which have a larger size compared with the size of the company, which have a small cap bias, which underweight value stocks, and which are managed by a man.
