Skin in the Game

I confess to having been deeply sceptical when I read an appeal last week by a boss of a fund management firm (Schnider,Walter & Kollegen)  to make it an obligation for fund managers to invest personally in the funds they manage. For Mr Walter, the notion that having some ‘skin in the game’ makes for better investment decision-making is so self-evident it barely needs defending. Nevertheless, the article cites a Morningstar study from 2010 that revealed above-average performances among funds where the manager held a personal stake. Continue reading


A Pill For Investment Success

If a drug existed that promised to help you achieve higher investment returns, would you take it? This question was recently raised in an online behavioural finance forum.

For simplicity, I limit my response to the single behavioural trait that is the most robust, widespread and probably responsible for the biggest disasters in investing history: loss aversion. Continue reading