tag:blogger.com,1999:blog-22517597.post6028161886529727729..comments2024-03-03T11:13:39.377+11:00Comments on Moomin Valley: Madame X: Miscellaneous FundsmOOmhttp://www.blogger.com/profile/03440274434662150925noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-22517597.post-90359169419884586132008-04-02T14:56:00.000+11:002008-04-02T14:56:00.000+11:00A less dramatic example is Bill Miller at Legg Mas...A less dramatic example is Bill Miller at Legg Mason who did well for a long time until the last two years. I've also commented on this series on Ron Muhlenkamp who seems to be coming back to form. Investment skill is both security selection and timing and there are so many things one could invest in so there may be some overlap but I don't think duplication even among long-only equity managers. I do recommend though diversifying across strategies - that's what most hedge fund of funds do. Not just a bunch of value-oriented long-only equity managers, for example. See my latest post for some funds I like.mOOmhttps://www.blogger.com/profile/03440274434662150925noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-26547936121812535392008-04-02T14:20:00.000+11:002008-04-02T14:20:00.000+11:00If management skill exists, doesn't it seem likely...If management skill exists, doesn't it seem likely that the good managers will make many of the same picks? I suppose it might rescue you if your skillful manager makes one really disastrous pick which blows up on him. (This clearly isn't impossible. Long Term Capital Management's positions were eventual winners had they been able to stay solvent long enough to cash in the positions.)<BR/><BR/>The disadvantage to this strategy is you now have to figure out how to pick multiple managers who are more skillful than the market. I have enough difficulty picking one. I suppose you could diversify active management strategy and pick managers with very different strategies.Andrew Stevenshttps://www.blogger.com/profile/13453328821252013152noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-52782373101105270112008-04-02T08:58:00.000+11:002008-04-02T08:58:00.000+11:00If you pick a few managers that appear to be above...If you pick a few managers that appear to be above average and they really are then their average alpha will be positive. Picking a few gives you more certainty of actually achieving positive alpha. In other words, diversify away the noise and reduce the risk that you pick one manager who happens to blow up. Now if you just pick managers at random, then you should go with an index fund obviously.mOOmhttps://www.blogger.com/profile/03440274434662150925noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-90805960220303306012008-04-02T04:04:00.000+11:002008-04-02T04:04:00.000+11:00I think it makes sense to have multiple actively m...<I> I think it makes sense to have multiple actively managed funds within a given category - and the more actively managed they are the more diversified you want to be - this is why there are hedge funds of funds - to diversify away active management risk.</I><BR/><BR/>I don't believe this makes sense. If you're going to diversify away active management risk, then an index fund makes all sorts of sense and a fund of funds doesn't appear to. We know that the average active manager does worse than an index fund, so why would we want to achieve that?Andrew Stevenshttps://www.blogger.com/profile/13453328821252013152noreply@blogger.com