Personal Benchmark: Integrating Behavioral Finance and Investment Management

Chapter 6Selection of an Active Investment Manager

Chuck Widger

Sensible investors seeking to engage an active manager focus on ‘people, people, people.’ Nothing matters more than high quality partners.

—David F. Swensen

The Zambezi River is the fourth largest river in Africa. Beginning in northwest Zambia, it carves its way through six countries for 1,670 miles, ultimately spilling into the Indian Ocean on Mozambique's coast. The river is marked by several beautiful waterfalls and hundreds of thrill-seekers each year endeavor to navigate its rough waters by raft. Almost half the rapids on the Zambezi rafting route are classed at Grade 5, defined as having “extremely difficult, long and violent rapids, steep gradients, big drops and pressure areas.” In short, Grade 5 rapids are the most difficult and violent rapids anyone should attempt in a raft. As you go down the rapids, making the right choices—to paddle hard or not at all, to paddle right or paddle left, to paddle forward or paddle back—can mean the difference between riding high and dry in the raft or plunging into the water, your body bouncing down the rocks, hoping that the next time your head pierces above the water line, you stay above it. Helping you make those vital decisions is what you hope to be a highly experienced and professional whitewater rafting guide. Therefore, it is essential to select a qualified rafting company and guide for the trip. Investing is not terribly different from rafting (although you ...