Clare Flynn Levy, founder and CEO of Essentia Analytics, discusses the core mechanics of portfolio decision-making on Capital Allocators.
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“The consistency with which they can get those decisions right, and the extent to which they can get the ones right really right, and the ones that get wrong only a little bit wrong, that is the key to success in fund management.”
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More from Clare Flynn Levy
AssertionNot checkable as stated
Flynn Levy: Nudge-prompted portfolio trades are usually more successful than normal trades
“And what we find is that they are more successful than your normal trades, usually.”
Clare Flynn LevyMar 12, 2018▶ 24:47Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
Insight
Flynn Levy: Contentious investment committee decisions often outperform unanimous ones
“And what we found so far is sometimes contentious decisions are the better decisions. For some people anyway, and for the first firm that we did this with, that was the case, which is, and particularly around whether, so when they would vote unanimously on som…”
Clare Flynn LevyMar 12, 2018▶ 26:52Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
PredictionNot checkable as stated
Flynn Levy: Managers who capture behavioral alpha will survive industry headwinds
“A lot of active managers will leave because it is getting so much harder to have a competitive advantage. But the ones who have behavioral alpha advantage, you know, where they actually are looking at their own behavior and saying, I want to continuously impro…”
Clare Flynn LevyMar 12, 2018▶ 35:02Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
Insight
Flynn Levy: Forcing portfolio managers to pause leads to better decisions
“What we find is that people's behavior changes, so when you do that, people do make a better decision, and it's not because we've told them what decision to make, it's because we've told them to pause and make a decision, whatever that decision is.”
Clare Flynn LevyMar 12, 2018▶ 24:01Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
Insight
Flynn Levy: Most active portfolio managers possess genuine underlying investment skill
“I see managers, it's like I look at x-rays all day long of different managers, and I see a lot of skill. It's quite rare that I see somebody where you're like, oh god, you should really find a different occupation. Usually there's something to work with”
Clare Flynn LevyMar 12, 2018▶ 35:51Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
AssertionNot checkable as stated
Flynn Levy: Most fund managers capitulate at bottoms due to loss aversion
“The vast majority of fund managers, not surprisingly, show evidence of loss aversion around exit timing when prices have been on a negative trend, or a positive one if they're short. So when the price is moving against you, the tendency is to hold on for too l…”
Clare Flynn LevyMar 12, 2018▶ 13:33Clare Flynn Levy and Cameron Hight - Moneyball for Managers (Capital Allocators, EP.43)
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