What's the difference between the performance of a mutual fund and the performance of the manager? Are you suggesting that academics are so stupid that in 40 years of research they've never controlled for things like manager migration? Just about anything you can imagine, has been studied. Noble Prizes are there for the taking if you want to put a study together that will overthrow Fama's work.
This conversation reminds me of the "God of the gaps" argument with active traders looking to ever shrinking ground to stand on as evidence mounts around them that what they claim to be able to do can't be verified by any known science.
I have been reading these studies for more than a decade s and I have yet to see one that follows the performance of individual managers. Care to give me a link to one.
It wasn't until I read the
wiki article that found out that Magellan's outstanding performance up until mid 90s was due less to Peter Lynch and more to Magellan's first manager and current Fidelity owner Ned Johnson.
After these two superstar's it had two decent guys and than 2 below average guys who've helped to bring down to the point it is a has M* rating of one star. Magellan is unusual in the tenure of its managers is typically been a decade or more.
A far more typical situation is guy gets hired out of a top business school, spends a few years working as a junior member of a big fund, does well gets promoted to the fund manager of a very small fund. He does it exceptionally well at that fund. Gets a couple of more promotions every 3-5 years to increasingly large funds. Finally he takes over the helm of a monster fund, the size of the fund coupled with having to manage a team of people (probably very low correlation between great stock picker a great manager) causes his performance to drop. He quits out of frustration and starts a hedge fund with a couple of other guys at which point his stock picking performance drops off the public radar screen.
In fact an academic is unlikely to spot the Alpha that this guy has added to the funds performance because it for only 3-5 years stretches and is spread out over 5 different funds.
A interesting study would be to look at the lifetime trading performance of the 500 highest paid traders on Wall St. If such a study was done and it showed that the 500 best traders actually provided no Alpha, I think it would be Nobel worthy. Because it would show that Wall St firms were wasting tens of billions by overpay traders who provided no benefit. The other possibility is that Wall St. management actually is smart and when the pay Joe $10 million and Bill $1 million to trade stocks or bonds, they are actually making more profits from Joe's work than Bill's.
Sadly I lack the brains, ambition, discipline, and academic credentials to convince Wall St. firms to give me the past trading records of their highest paid traders to make such a study and get my Nobel Prize.
