Active fund management is one of the most behaviourally complex areas of investing. Choosing a fund, sticking with it through underperformance, and knowing when — if ever — to sell requires navigating a thicket of incentive misalignment, marketing, and our own psychological weaknesses. These posts explore the challenges of fund selection, the problems with fees, and why so much of what the active management industry does makes more sense for the industry than for investors.

 

The Performance Fee Puzzle
Performance fees are presented as aligning manager and client interests — in practice, they often do precisely the opposite, in ways that are easy to miss.

Thinly Spread
High yield spreads at historically tight levels — an exploration of what investors should actually do when an asset class looks expensive but everyone owns it.

Good for Who?
The two most dangerous words in investing — ‘democratisation’ and ‘innovation’ — tend to signal solutions designed primarily for the people selling them.

How to ‘Cheat’
Before evaluating any active manager, the first question should be: how would someone in this asset class manufacture the appearance of skill? Knowing the answer is essential.

Why Did You Buy That Stock?
Research into the actual motivations behind individual stock purchases reveals thirteen recurring factors — and most of them are more behavioural than analytical.

Thematic Funds – Double Trouble
Thematic funds exploit both our love of compelling narratives and our tendency to chase recent performance — a combination that produces reliably poor outcomes for investors.

Does ‘Skin in the Game’ Really Matter?
The idea that a manager investing their own money is a reliable positive signal sounds intuitive — the reality is considerably more complicated.

Not All Predictions Are Created Equal
Some forecasts are genuinely useful; most aren’t — and the distinction between them has important implications for how we evaluate active managers.

Betting with a Weak Hand
Most active investment decisions are made from weaker starting positions than investors realise — and the evidence from poker about skewed return distributions is instructive.

The Problem with Concentrated Funds
High conviction sounds compelling, but concentrated funds create a behavioural problem that is at least as significant as any investment case for them.

A Tool for Testing Investor Confidence
Expressing views in probabilistic terms is uncomfortable but essential — here’s a practical framework for doing it in a way that improves decision-making.

The Alpha Cycle
Strong returns in a particular area attract attention, capital and narrative — and then the alpha disappears, just as investors have piled in.

The Curious Case of Catalysts
‘What’s the catalyst?’ is one of the most common questions in active investment — and one of the least useful, for reasons that are worth understanding.

Why is it so Easy to Disregard Behavioural Finance?
We talk about behavioural finance more than ever and apply it less than ever — here’s why the gap between knowledge and action remains so stubbornly wide.

Active Investors Need to Think About the Odds
Active management is not inherently bad — but it requires thinking explicitly about probabilities in a way that most investors and managers avoid.

Having an Edge Isn’t Enough, Investors Also Need Patience
Even if a fund has genuine skill, capturing its returns requires surviving the inevitable periods of underperformance — which is harder than it sounds.

Has the Rise of Passive Funds Really Broken Markets?
The claim that passive investing is distorting markets is a popular argument — but does the evidence actually support it?

Which Type of Investor Are You?
Most investors don’t have a clear sense of what they’re actually trying to do — and that confusion is the source of many of the decisions they later regret.

Is a Market Cap Index Easy or Hard to Beat?
The question sounds simple but the answer is genuinely complex — and the confusion around it has been systematically exploited by the active management industry.

Why Do Thematic Funds Fail?
Despite a consistent track record of disappointing investors, thematic funds keep launching — because the behavioural forces that make them attractive never go away.

Does it Really Matter if a Fund Manager Has ‘Skin in the Game’?
A deeper look at the skin-in-the-game argument — when it matters, when it doesn’t, and why it’s more complicated than the simple story suggests.

Things Professional Investors Should Say but Can’t
Good investment behaviour often conflicts directly with career survival — here are the honest things that professional investors rarely say out loud.

We Have Expected Goals, What About Expected Alpha?
Football has developed sophisticated process-based metrics that ignore short-term results — the investment industry could learn something from this.

The Four Questions Investors Must Ask
Before making any active investment decision, there are four fundamental questions that should come before any analysis of the specific opportunity.

Why Don’t Fund Managers Talk About Skill?
Fund managers discuss past performance endlessly but almost never discuss skill — the distinction matters enormously, and the evasion is telling.

Are Fund Manager Meetings a Waste of Time?
Hours spent sitting across from fund managers trying to assess their skill — but is the meeting format actually useful, and what does the evidence say?

Should We Listen to Outperforming Fund Managers?
A strong track record makes us want to hear everything a manager says — but outperformance is a dangerous credential to grant too much authority.

Do Active Funds Need a New Fee Model?
The current fee structure in active management is problematic — but the proposed solutions often create new problems as bad as the ones they solve.

Three Questions to Answer Before Investing in an Active Fund
Most people invest in active funds without properly confronting the behavioural challenges involved — these three questions force the issue.

The Survival Game
Active managers face a structural conflict between the behaviour required to generate long-term outperformance and the behaviour required to keep their jobs.

Why is Active Fund Selection So Difficult?
Not just because skill is rare, but because the entire system — how managers are marketed, evaluated and rewarded — works against successful selection.

Short-Term Performance is Everything
Despite knowing it shouldn’t be, short-term returns drive almost every decision in the fund industry — for managers, selectors and investors alike.

What Are the Odds of Making a Good Investment?
Uses the world of competitive pool to think about the distribution of outcomes in investing — and why skill and luck are so hard to disentangle.

The Myth of Consistent Outperformance
The industry venerates consistent outperformers — but consistency is often a statistical artefact rather than a signal of superior skill.

All Active Investment Decisions Are About Valuation or Price
Cutting through the jargon of investment styles to find the one question that underlies every active decision: do you think something is mispriced?

Via Negativa (What Should Fund Investors Not Do?)
Before worrying about what to do, it’s more valuable to define what not to do — the list of avoidable mistakes is long and largely ignored.

Only Invest in Active Managers If You Can Withstand Prolonged Periods of Underperformance
The behavioural challenge of owning active funds is at least as difficult as the challenge of identifying skilled managers — and much less discussed.

How Should We Judge The Quality of a Sell Decision?
Sell decisions are the most neglected part of fund management — and judging them purely by what happened next misses most of what matters.

All Active Fund Managers Should Run Systematic Replicas of Their Portfolios
A provocative idea: the best way for discretionary managers to understand their own edge is to compare their decisions against a systematic version of themselves.

What are the 10 Biggest Mistakes Made by Fund Investors?
A frank assessment of the most common and costly errors — from chasing performance to misunderstanding what a fund manager’s track record actually means.

Why Do Fund Investors Neglect Base Rates?
Before diving into the details of a specific fund, the base rate question — how often do funds like this one succeed? — should always come first.

It is Difficult Being a Skilful Investor
Skill in investing is genuinely hard to demonstrate — not because good investors don’t exist, but because the signal is buried under so much noise.

What is the Attraction of Star Fund Managers?
We are drawn to investment stars for reasons that have more to do with narrative and status than with the evidence on their future performance.

Active Management has Become a Game of Musical Chairs
The concern that passive investing distorts markets has things backwards — active management has its own structural distortions that get far less attention.

Do Fund Investors Prefer Lower Fees or Strong Past Performance?
When you put lower fees and strong recent returns in direct competition, the evidence on which wins is both clear and depressing.

10 Things Fund Managers Say and What They Actually Mean
A translation guide for the common utterances of active fund managers — what they say for commercial reasons and what’s actually being communicated.

Active Management is Reliant on the ‘Inside View’
Active decisions focus on the specific details of an opportunity while ignoring the base rate evidence — and that’s exactly the wrong way round.

When to Ignore a Fund Manager
Some things fund managers say are designed to manage perception rather than communicate information — here’s how to tell the difference.

What are the Chances of Finding an Active Manager with Skill?
Works through the actual probability of successful fund selection given realistic assumptions about skill prevalence and our ability to identify it.

How Do You Identify Skill?
The fundamental challenge of distinguishing skill from luck in a domain where randomness is pervasive and feedback is slow and noisy.

Owning Quant Funds is Not Easy
Systematic strategies can be behaviourally more challenging to own than discretionary ones — the absence of a compelling story makes drawdowns harder to endure.

The Worst Time to Buy an Active Manager
The time when a fund feels most compelling to invest in is almost always the worst time to do so — and the reasons why are entirely predictable.

Are Index Fund Investors More Vulnerable to Bubbles?
The argument that passive investing creates bubble vulnerability has a surface plausibility — but the reality is more nuanced than the critics suggest.

The (Other) Problem with Active Management
Beyond the well-documented performance challenges, there’s a behavioural problem with active funds that compounds the financial cost for investors.

Things to Remember When Selecting an Active Fund Manager
A collection of hard-won observations about the fund research process — the things that matter and the things that feel like they matter but don’t.

Why Can’t Fund Managers Admit Mistakes?
The inability to acknowledge errors is endemic in active management — and understanding why tells us a great deal about the incentives that shape the industry.

Things That Fund Managers Don’t Say Enough
Honesty, circumspection and uncertainty are undervalued in fund management — here’s what it would sound like if managers said what they probably should.

How Can You Tell When a Factor Stops Working?
Factor investing relies on persistent return premia — but identifying when a factor has been arbitraged away versus is just going through a bad patch is genuinely hard.

Performance Consistency is not an Indicator of Equity Fund Manager Skill
One of the most cherished metrics in fund selection turns out to be statistically misleading — and continuing to use it has real costs for investors.

Performance Fees aren’t the Solution to Active Management’s Problems
The first of two pieces on performance fees — why the most common proposed solution to incentive misalignment often makes things worse.

Is Active Fund Management a Market for Lemons?
Applies Akerlof’s famous information asymmetry framework to active fund management — with uncomfortable conclusions about the structure of the market.

The Perils of Past Performance
One of the earliest posts on the blog — and a theme that has never gone away: why past returns are such a poor guide to future ones, and why we use them anyway.

Why is Value Investing So Difficult?
Value investing has strong theoretical support and a long track record — and yet most investors who try it fail, for reasons that are almost entirely behavioural.

Why Don’t Fund Investors Sell Winners and Hold Losers?
The disposition effect in individual stocks is well-documented — but fund investors display a different pattern, and the reasons why are revealing.