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June 18, 2021

Are good fund managers really just lucky?

Do fund managers get better over time? Apparently not, according to recent research by Bryant University professor Jack Trifts.

According to Trifts and colleague Gary Porter, even the best solo fund managers, in the United States at least, falter the longer they stay in the game.

And, while fund companies don't tout star power here as much as they do across the border, there's little reason to suggest that Canada is really much different.

The academics’ other findings are:

  • Solo fund managers who survived more than 10 years were likely to have done better or at least matched the market in their first three years;
  • Although each of the very best managers generated decent returns following those first three years, the majority were not able to maintain that level of initial performance;
  • The longer the best solo fund managers managed a fund, the poorer their average annual performance.

“We think this occurs because ‘superior performance’ is really just random luck,” Trifts explains. “Fund managers who have high performance early in their careers are branded stars while those with poor performance tend to disappear from the industry.”

The researchers looked at results spanning more than 80 years to identify the best solo mutual fund managers and the keys to their success, matching their performance and tenure within the nine Morningstar styles.

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...