“When I look back on all these worries, I remember the story of the old man who said on his deathbed that he had had a lot of trouble in his life, most of which had never happened.” – Winston Churchill
In the money management industry, the holy grail is outperforming the overall market over a long period of time. For most practitioners, that means beating the S&P 500 Index.
Other indexes are used as a proxy for the broader market as well, such as the Wilshire 5000 Total Market Index, the Dow Jones Industrial Average, the NASDAQ, the MSCI All Country World Index, and dozens of specific country indexes.
Outcomes are very important in the industry, especially if you’re trying to land massive institutional accounts like pension funds, endowments or foundations.
Big money has plenty of options to choose from, including venture capital, hedge funds and private equity, as well as commodity based funds or other alternatives investment strategies like real estate and option based trading.
In addition, institutional investors rely both on market indexes for broader equity exposures and individual money managers for more specific investing strategies.
It makes perfect sense that they’re going to choose managers and funds that they believe will do better than the market.
In my opinion, focusing too much on month-to-month results is generally not a good use of time.
Short-term results matter of course, but I’m also interested in process. That is, I want to know exactly how you want to invest, why, and what’s involved.
In my view, if we get that right, if our analysis of a company’s competition, management, growth opportunities and financial condition are sound, we can make smarter decisions.
Over a longer period of time, say three or five or ten years, you will know how effective the analysis was and your returns will be a byproduct of those decisions.
In the meantime, every day, week, quarter, and year, there will be all kinds of fluctuations and events which affect the market and its thousands of indexes.