The Financial Analysts Journal publised an article by Michael L. Troutman on the impact of plan sponsors’ focus on past performance in asset manager selection. Cognitive errors lead investors to value strong performance in previous periods and to confuse a firm’s business success with true skill of an asset manager.
Michael L. Troutman described the story of Yankee owner George Steinbrenner who invested millions US dollars to attract a team of top baseball players in the 1980s to his team. Despite this great team and the big salaries the Yankees did not win and even finished last at times.
The “game plan” for many fund selectors is similar to Mr. Steinbrenner’s and the fact that the past does not predict the future results in many cases in disappointing performance of the selection decision