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Tim Edwards: Period by period, year by year we look at the top quartile of managers and we see how many of these top quartile managers where top quartile the year after, the year after and the year after. What we found there is I’m afraid, bad news for the believers in the hope that the past is a guide to the future. And in fact, it is even worse than you might hope. So the chance, historically, of a manager remaining in a top quartile for five consecutive years is actually quite a bit worse than the chance of getting heads five times in a row.
Robin Powell: So, why is there so little persistence in outperformance? One explanation is that it’s extremely hard to outperform. Another is that outperformance is sometimes down to luck.
But Tim Edwards believes there’s another reason why fund managers often fail to reproduce their past success.
Tim Edwards: What tends to happen is that funds that perform very well are rewarded with
Robin Powell: So, don't be swayed by past performance. It doesn’t predict future performance. In fact, you might be buying into a fund at just the wrong time. Thanks for watching. Goodbye.
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