“Are you really going to buck convention and stick your neck out to recommend a firm that you think has all of the attributes for future success? Or, do you want to be in a position of saying “no” when a manager is shooting the lights out (and being selected by everyone else)?”
“Ironically, those are likely exactly the right things to do, but we aren’t built to do them and our organizations aren’t either. So we keep trodding the same ground, selecting from those screened past winners, despite the evidence that it doesn’t work.”
These are quotes from a Tom Brakke article linked here, Tom is an investment consultant that has great insight on effective due diligence of investment managers and processes.
As a manager to a newly registered fund, we face this hurdle everyday speaking with advisors. There’s no way for us to speed up time and so our focus is communicating methodology, process and structure and to be honest that’s what matters. Don’t get me wrong performance is important and the objective should always be to make money. However, understanding the philosophy of an investment process/fund and its sustainability is a more diligent way of evaluating than screening past winners.
It takes “Big Balls” to go against the herd but that’s where the opportunities lie.