When state pension funds hire new money managers, they tend to hire winners who then underperform and fire loosers who then tend to overperform. In fact the newly hired managers trail the bench mark by about half a percent - exactly what you'd expect to observe if past returns were random and we merely hire managers who got lucky.
The lesson is clear: states, endowments, and indeed everyone should index and stop wasting money pretending that they have superior investment skills.
HT: Ron Elmer
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