Tuesday, February 7, 2012

Call me when they announce the manager of next year

There tends to be a lot of talk around this time of year about the Morningstar Managers of the Year, which are announced in January for the previous year.

Marketwatch says that you should think of these like the Oscars, which say how good the actor's last performance was.  They go on to point out several high-profile crashes among former award winners.  "In fact, looking out over the last three years, managers seemed to have a rough time running money while admiring their trophies. Three of the funds finished in the bottom 10% of their peer group in the year after their triumph, another was in the bottom quartile of its category, and two more were below-average."

Dan Solin at HuffPo points out that we don't really have enough data to know whether these managers were truly skillful or merely lucky.

The Wall Street Journal adds to the noise by claiming that the awards aren't actually that bad. "For domestic managers, the verdict was mostly good. Managers in 16 of the 19 years Rekenthaler looked at either met or exceeded their category average in the following 10 years or the time elapsed since the award."  Here's a little tip - anytime someone says that a fund beat it's category average, run in the other direction.  You are being misled - remember that the "category average" trails the benchmark, usually significantly.

They do correctly point out, though, that "Like the company’s star ratings, the Manager of the Year awards are supposed to be backward-looking. But as Rekenthaler notes, no one actually reads them that way."

And isn't that the biggest problem with having these "awards" in the first place?  Isn't Morningstar deliberately misleading people by releasing data they know will be misinterpreted?

1 comment:

  1. An admissions essay writing service comes at a premium price. First, there is a full service package called Model Essay Development in which you work directly with writers to completely help you develop an amazing essay from scratch. smartcustomwriting.net for all of the students to prepare term papers or, any college papers.