Performance Consistency Does Not Equal Fund Manager Skill

One of the most commonly employed methods for judging whether an active equity fund manager possesses skill is monitoring performance consistency – that is the regularity with which a particular manager outperforms their benchmark index over specific time periods (frequently calendar years, but often briefer). This shorthand gauge of quality is pervasive across asset management groups (sellers), fund selectors (buyers) and the media. The use of such a context free number is deeply flawed.