Coroebus’ first olympiad is complete. We have been operating for four years and continue to meet challenges as they come. Performance has been competitive, though scaling continues to be an area of focus as I continue to develop PythiaSM.
In the area of portfolio management or investment management there is a continuing debate as to whether managers deliver enough value to justify their fees. With the growing use of passively managed portolfios, indexed portfolios, roboadvisors and the accompanying downward pressure on fees, active managers face existential threats. Adapt or expire…
Unfortunately, most managers do not capture alpha, or market outperformance, to do little more than pay themselves. Also, most managers who are able to outperform the market and their competitors in the three to five year term, tend not to outperform in the longer term. Though we have our heroes of finance who are able to deliver exceptional returns over thirty plus years, they are the outliers, and more importantly it is difficult to identify why they are able to deliver superior returns.
In the age of big data and artificial intelligence many would like to attribute their performance to superior algorithms and quantitative analysis. It seems more likely and accurate to attribute it to asymmetric information. Simply put, they know something their competitors/other investors do not.
Numbers are a great story telling tool, but as an investor you can get the numbers right, and still lose money. You can be right by most standards, and still be wrong. The disclaimer you will find in any fund marketing material “Past performance is not an indicator of future results/outcomes,” is meant to communicate this to potential investors.
For institutions, this often means they are paying a portfolio manger so that they have someone to blame/fire when performance suffers. See the global pension crisis…
For individuals, especially those with fewer assets, the value of an advisor is likely in their strategic planning and behavioral coaching rather than in their prowess as portfolio managers. For most individuals, public market investment returns will not be the source of their wealth, but part of a capital preservation strategy.
According to research conducted by Roy Williams and Vic Preisser, authors of Preparing Heirs, 70% of intergenerational wealth transitions do not occur successfully. Start building your team of advisors to prepare your family to achieve your wealth mission.