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03/04/2005: "Updated index for: Active v tracking"

Does Fidelity Special Situations Manager Anthony Bolton disprove active management sceptics?
The 'performance myth' gets its life blood from the emergence of a few outstanding managers, such as Fidelity's Anthony Bolton in the UK. I thought it would be interesting (though quite technical) to show you how he looks when put through the same tests we use on all active managers (as part of our wealth management process). He is good but not good enough to replace even 20% of a tracker. And his record has been so inconsistent over the years that investors or their agents may well have given up on him before they got the big payoff of the last few years. This is the fatal flaw, in practice, not theory, of active management.

More academic research on active management
New research from the University of Exeter makes too much of weak evidence of performance persistence over a short period amongst the best UK pension fund managers in their UK equity portfolios. This sort of research does more for the cause of tracking than researchers seem to realise.

Active management on the back foot
This 2002 article in Financial News challenged trustees to rethink why they hire active managers and, in the light of the Merrill Lynch/Unilever case, how they should write the mandate to control managers' active bets

The consumer impact of the performance myth
Slides used by Stuart Fowler at INQUIRE conference, Berlin, 2002. The presentation takes the theme of Chapter 11 of No Monkey Business: there is no evidence of exploitable performance persistence in UK equity funds. The effect of high fund costs is to turn an essentially random process into a bad bet. Concealing the nature of the bet is an integrity issue for an industry that spends massively to perpetuate the myth that consumers can pick the adviser who can pick the manager who can pick the stocks that outperform.

Dogs stay dogs - or do they?
This feature was on the old No Monkey Business website soon after the book was published and focused on research arguing that poor performance persists. The truth is, sometimes it does, sometimes it doesn't - that's the problem with active management. Since they probably didn't look like dogs when bought, it is a reminder that the problem of dog funds arises only because people buy funds with good past performance. Over long periods, even stars usually look like dogs somewhere along the way, so how do you then tell the difference between a star and a dog

Poor research on good performance
In a briefing to financial journalists in October 2002 Stuart Fowler counters the claims made by Charles River Associates (in a paper commissioned by industry body IMA) that past performance is weakly predictive. IMA's agenda is to stop the FSA using its influence to wean the public off an obsession with past performance. As the FSA (and many academics) went on to show, the CRA research is deeply flawed but, even if it were not, the conclusions do not alter the practical outcome: picking active funds is a mug's game.