Here summarizing an academic paper by Paul Wooley and Dmitri Vayanos of London School of Economics
I respect FT policy and just provide the takeaway from the article entitled
- Traditional investors are destined to be frustrated they give money to a money manager that fails to outperform the relevant inded. "Being a traditional investor sucks, doesn’t it?"
- Being a traditional manager "sucks too". Investors expect alpha but dont want a policy that differs "too much from the benchmark indices"
- Focus on Long Term Results
- Limit turnover in the portfolo
- Invest for the long term focus on the long term not short term price movements
- Dont benchmark to cap weighted indices which have higher weightings to assets that are highly valued and subject to poor long term results
- Avoid or limit performance based conpensation or tied them only to long term performance
- Avoid "sophistate "new" strategies and "alternative investments" even if they may offer some advantages those are likely to be offset by high fees and lack of liquidity
- Insist on transparency of the portfolios
Unfortunately for me this is hard to do for investors...which means I either suffer "career risk" with clients withdrawing assets based on short term performance.