18% of fund managers make the right decision 'most' of the time

Findings from new tool deemed "a sea-change" for the industry

Elliot Gulliver-Needham
clock • 2 min read

Only 18% of fund managers make the correct decision a majority of the time, according to a new research paper by Essentia Analytics.

The Essentia behavioural alpha benchmark, which launched yesterday (15 September), uses propriety analysis to attempt to assess portfolio managers on their decision making skills, rather than their recent past performance, which is "highly subject to the random effects of luck". This tool incorporates seven key metrics to assess fund managers: stock picking, entry timing, sizing, scaling in, size adjusting, scaling out and exit timing. The paper found that most managers got their decisions wrong most of the time. Only 18% made decisions that added value a majority of the time, and the...

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