Team GB 'can teach fund managers how to go for gold'

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This, at any rate, is one conclusion from manager performance data compiled by Northill Capital, the $ 36 billion asset manager led by Jon Little.

Northill has estimated that the top decile of managers with the biggest proportion of assets in a single strategy has outperformed those with the broadest range by an annualised 202 basis points, before fees, over the five years to December 2015.

Ryan Sinnott, director of strategy and development at Northill, said: “Focus is as important to success in asset management as it has been in the Olympics.”

Northill used data for institutional managers from investment consultant Mercer to estimate that those in the most-focused decile also beat their indices by 180bps over five years. Northill stressed their returns were boosted by strong performance against the indices from emerging market and European equity managers.

According to a S&P Dow Jones report earlier this year, 80% of active funds have lagged their indices over 10 years. According to an August survey by data provider Morningstar, US equity managers have been trounced by the indices over one, three, five and 10 years.

Like Northill’s top decile, Team GB’s governing body, UK Sport, has targeted resources on its best prospects – notably cycling, sailing and rowing. Northill added: “The business model can influence outcomes.”

Sinnott said that managers coming top in their field did so through a commitment of time and resources to specific strategies, and by avoiding distractions. Team culture and performance-related incentives also matter. He said Team GB reflected much of this – although Olympics competitors would want to earn medals, rather than bonuses.

Rick Di Mascio, chief executive of data provider Inalytics, said managers could become more successful by directly embracing the techniques used to train sports stars.

His firm advises 14 star managers on how to raise their game, using data to point out ways of improving working practices and making actions more instinctive. Di Mascio uses sports coaches like former British cycling technical director Shane Sutton to get the message across: “They might, for example, encourage managers not to sell their stocks too early.”

Michael Mauboussin, head of global financial strategies at Credit Suisse, said the pressure was on managers to raise their game, and not just because of the competition from cheap passive strategies. In a research report published on August 4, he said: “The difference between the best and the average is less today than it was a generation or two ago.”

He added that skilled managers could take advantage of naïve decisions by those who lack ability: “The truth is that weak players whom the strong players require to generate excess returns are fleeing at a record pace.”

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