Building Fund Manager Indices to Separate Manager Skill from Fund History

Summary

This research summary argues that a fund’s track record can mix the results of successive managers, obscuring changes in style and investment approach. It proposes constructing a separate index for each manager from funds solely attributed to that manager, weighting multiple funds by assets. For gaps between appointments, it fills the interval using a weighted benchmark based on the fund types the manager previously ran. The study applies the method to current public-fund managers and then examines manager performance persistence, style exposure, stock-selection ability, and market-timing ability across a broader sample.

The summary reports that about 22% of managers with more than three years of assessable results showed performance persistence; it also reports stock-selection ability for 27.54% and timing ability for 25.94%. Equity-oriented managers showed the greatest overall exposure to mid-cap growth. These are summary-level findings: the underlying paper is referenced but not reproduced, and the excerpt does not explain the statistical tests, selection filters, or uncertainty around the estimates. The index construction and gap-filling choice may also affect measured results.

Key ideas

• Fund-level track records may combine results from managers with different styles and preferences.
• The proposed manager index aggregates funds attributed solely to one manager, weighted by fund size.
• Career gaps are filled using weighted benchmarks for the fund types previously managed.
• The summary reports persistence among about 22% of managers with more than three years of assessable results.
• It reports stock-selection ability for 27.54% and market-timing ability for 25.94% of the analyzed managers.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.