And you thought it was obvious.

Some may say a fund's performance is easy to discern, but it turns out investors can't agree on what good or bad fund performance is in the first place, Barron's Teresa Rivas writes.

Rivas reports on a paper, "Alpha and Performance Measurement: The Effects of Investor Disagreement and Heterogeneity," by Wayne Ferson and Jerchern Lin, who found that "investors will not in general agree about alphas, and the same fund can look attractive to one investor but not to another."

That's not good because a fund that suffers from heterogeneity, or a range of differing views among investors, it ha less flow for a given performance level, Rivas writes, referring to the paper. "These effects are separate from uncertainty about the true value of traditional alpha," Rivas quotes the authors' paper as reading.

What's a PM to do?

Rivas doesn't offer any thoughts on an easy fix, but she does mention that the trend of fund managers and researchers claiming individual investors need individual investing strategies has been picking up lately.

To read more, click here.  

Edited by: Casey Quinlan


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