Investment firms that focus on blame, for example holding people accountable for short-term volatility, don't understand statistics and shouldn't be given your money, according to Jason Hsu, chief investment officer of Research Affiliates.

In a column written for Barron's, Hsu delves into the nuances of selecting investment managers who consistently deliver alpha, and whether such a search is even possible.

He even posits that such an endeavor is really just a matter of playing the "Loser's Game."

Nonetheless, Hsu writes, there seem to be reliable indicators of underperformance, including "the culture of blame," which he deems is "one of the most toxic culture elements for investment management organizations."

Blame has many brothers, including fear, defensiveness, and self-righteousness. When the four horsemen are present, personal accountability, creativity, openness, and learning go into exile. From what I have heard and seen, when blame lives in an investment organization, professionals take joy in second-guessing investment decisions after poor short-term performance.

Read more of Hsu's comprehensive analysis in Barron's. 

Edited by: Tommy Fernandez


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