ReSolve's Riffs on Nepotism and Return Chasing in Institutional Manager Selection with Brian Portnoy (EP.28)

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day.

Despite the common understanding – and ubiquitous disclaimers – that past performance is not indicative of future returns, it is well documented that performance chasing can be almost considered a fundamental law of capital allocation among institutional and retail investors alike. It is also an open secret in the industry that well-connected managers are much more likely to receive institutional allocations than obscure ones.

To discuss and shed some light on a recent whitepaper that explores these topics, we invited our good friend Brian Portnoy to bring his vast experience as a hedge fund analyst and allocator to bear. Throughout the conversation we cover:

• How to determine whether a manager has skill
• The evolution of alpha through time
• Many ways of defining alpha
• The role played by familiarity bias
• Principal-agent problem in capital allocation

It was a far reaching discussion with many layers, and once again much improved by the many questions and comments we received throughout the live stream. Keep ‘em coming!

Thank you for watching and listening. See you next week.