A view to a skill

The debate about how quantifiable the skill of active managers is has been reignited again by research from Inalytics, the specialist manager evaluation firm, which concludes fund managers with no significant skill in stockpicking have still been able to outperform the market.

It carried out research on a sample of 62 Australian long-only portfolios, representing over half of the Australian asset management industry, which saw 42 managers (67%) outperform the standard Australian equity benchmark, the ASX 300, between 30 April 2006 and 31 December 2010. A proportion of the outperformance was generated from the underweight stocks, which Inalytics claims is ‘a highly unusual situation and one commonly associated with luck rather than skill.’ The research shows of the managers that outperformed, 11 saw a greater gain from the underweights than their actual st...