On 1st August 2019, Business Day carried an article on the performance of asset managers and how difficult it is to choose a winner from among them. In that article they commented that research done by Goldman Sachs in the US showed that, “competing managers, no matter how much they purported to have unique strategies all tended to pile into the same bundle of high-performing stocks”. In May of 2016, for example, the research found that 68% of fund managers were substantially invested in the same 10 shares.
In our experience, this supports our position that fund managers tend to be more concerned with their reputations and their jobs than the performance of the funds under their care. For this reason they tend to move together – like a herd of sheep. When one crosses the bridge, they all cross the bridge, because there is safety in numbers. The worst thing for a fund manager is to find himself on this side of the bridge when all the other fund managers are on the other side – because that is how you lose your job in the fund management business. It is much safer as a fund manager to choose an investment which has already been selected by other fund managers, even if you think it is wrong, because then, if it fails, you are at least in good company – and you will not be fired. No fund managers were reported to have lost their jobs as a result of the R200bn which was lost in the Steinhoff debacle. Read More