Better way to assess fund managers?

Could measuring the impact of fund manager decisions be a better way to measure their performance?.

I learned last week that Lord Myners came up with a wizard way to measure the performance of fund managers. Put simply, it is the ratio between what the manager’s portfolio actually achieved over a time period, and what it would have achieved if the manger had not bought or sold anything at all.

This would lay bare the impact of the fund manager’s decisions, all of which, of course, cost money because they incur expenses. A bunch of academics have had a go at it, and in two out of three trials, the ‘inertia’ portfolio came out on top over three years.

This would seem to be a great way to shine some light on the unit trust business. Coupled with all cost disclosure in pounds and pence, it could improve the information available and so make the market work better.

Expect no interest in either idea from the regulator.

Read this article at http://www.candidmoney.com/articles/article143.aspx