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Mark Hulbert: Harvard Teaches Investors A Lesson In What Not To Do

TedTed
in Fund Discussions
FYI: Don’t fire your investment manager just because he failed to beat the stock market last year.

I can already hear the howls of protest: If trailing the market isn’t a fireable offense, then what is?

My answer: It’s not that past performance doesn’t count; what’s irrelevant is performance over the recent past. Calendar-year performance, for example, tells you next to nothing about whether your manager is a good bet for future returns.

This is an exceedingly difficult lesson for us to take to heart. Even Harvard University, with the largest endowment fund in the world, apparently is having trouble with it.

The university in late January laid off more than half its investment-management staff. Though the institution’s press release announcing this didn’t mention it, the layoffs come on the heels of a disappointing fiscal year in which the endowment actually lost money, lagged behind its benchmark by 3 percentage points, and trailed the total return of the S&P 500 Index SPX, +0.73% by 6 percentage points.
Regards,
Ted
http://www.marketwatch.com/story/harvard-teaches-investors-a-lesson-in-what-not-to-do-2017-01-31/print

Comments

  • sma3
    Harvard is having problems attracting good in house talent to mange the money because the faculty and students go ballistic when they hear that someone who can deliver market beating returns will not work for less than 2 or 3 million a year. Add to that the fact that every faculty member thinks s/he can do a better job

    Yale' David Swensen figured this out years ago. Run a low key inexpensive shop. The Investment manger scouts for talent and then hires the best to run the money independently. It is hard for all the lefties to complain when all they see is 8 to 12% returns year after year... They do not know that the outside manger is getting 2 and 20

    Swensen however is a Prince. For years he worked for $1,000,000 ( which goes farther in New Haven than Boston .. I should know I live in New Haven) I think they finally gave him a raise
  • Mona
    sma3,

    Please order me a white clam well done from Modern.

    Richard C. Lee 1973

    Mona
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