Bucking the consensus rules when you perform well. Yet when your absolute performance (or relative performance to folks with different approaches) suffers, non-comformity bites, hard.

In his "Rekenthaler Report" column yesterday, Morningstar's John Rekenthaler ponders this classic game theory problem's application to mutual fund PMs. He highlights the case of one unnamed, conservative target date fund family, as compared with the very aggressive T. Rowe Price target date funds. Rekenthaler feels the non-conforming PMs' pain and wonders if it contributes to herding behavior:

Such is life at a money manager that has suffered bottom-decile returns over the trailing three years--playing defense rather than offense; seeking to retain existing clients rather than to acquire new ones; constantly on the road, settling customer concerns. While an investment manager with strong numbers rarely if ever is fired for poor communications, those with weak numbers almost certainly will. The investment wicked receive no rest. They are forced to enter the spin cycle.

 

Edited by: Neil Anderson, Managing Editor


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