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Simple But Not Easy: An Autobiographical and Biased Book About Investing by Richard Oldfield

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Chapter 8 – What not to look for in a manager

The traditional approach to choosing managers puts overwhelming emphasis on two things above all: performance and process. One adviser recommends a version of Venables ratings with 40% of the rating depending on process and 20% on performance, the rest on organisation, people, and fees.

The previous chapter made little of either performance or process as criteria for choosing managers, even though, looking back, performance has to be the yardstick of success. It is no good saying, “we had brilliant managers though they performed very badly.”

Clients need lucky managers as armies need lucky generals. But looking forward, focussing on past performance too heavily is at best useless and at worst ...

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