Q3 2020 Commentary
"We were wrong" is a phrase that largely goes unuttered in our industry. I suspect that ego has some hand in this (as well as compliance and legal departments), but the phrase does not exactly inspire great confidence among investors.
In the past I’ve argued that asset management is a business in which hubris sells but humility survives. Yet short-term performance chasing invites a behavioral version of Gresham’s law where “bad behavior drives out good” and managers are incentivized to market with bravado.
Without projecting enough confidence, an asset manager may not survive long enough for humility to triumph. And wrong does not project confidence.
What do you do, then, when the research you conduct suggests that the efficacy of the very systematic style you’ve built your firm upon may be reduced going forward?