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> just as we finally learn which funds are worth the price a new manager takes over, and new managers have a tendency to not do as well. This seems like a test
by jldugger 8y ago
> just as we finally learn which funds are worth the price a new manager takes over, and new managers have a tendency to not do as well.
This seems like a testable hypothesis. If experience pays dividends, or if novices pay a penalty, you'd expect to find this to persist over time.
- bluGill 8y agoThat is an interesting hypothesis, but it isn't the one I was suggesting. I was suggesting that the rare great manager regardless of experience will do well over long time periods. Those managers do not pass their experience/knowledge on to those who take over from them.
- jldugger 8y agoI'm not sure great fund managers exist at all. I'm sure you can find a few emphatically bad ones, I guess. For whatever rare managers who do well over long periods of time, why isn't that knowledge transferable? I can think of two possibilities: 1. They have had an incredible run of luck. When you have process with randomness baked in, and thousands of managers, someone is expected to beat the average 10 years in a row. 2. A well cultivated network of insider information, or other nefarious means. Madoff claims to have started his Ponzi scheme in the early 90's, and it took multiple decades for that to be uncovered. Similarly, Cornblum and Grmovsek took 14 years to be discovered.