It is well-established that you're better off, over the long haul,
investing in passively-managed index funds rather than actively-managed
mutual or pension funds. Over time, as numerous studies have shown,
nobody meets the market once you adjust for risk and the survivor bias.
Why? In part, at least, because the managers of active funds are
subject to a whole slew of cognitive biases and errors that tend to
adversely affect their decisionmaking. The latest example is the
split between US and global money managers with respect to the pending
election:
As in most current election polls, the race came out close. By 41 percent to 37 percent the nearly 300 respondents, who together manage around $940 billion in investments, said Kerry, the Democrat, would beat Bush, the Republican. The rest did not know.
But there was a difference in view depending on where the fund manager was based. "This is very much an international perspective of the election," said David Bowers, Merrill's chief global investment strategist. Bush won among the 36 North American-based respondents by a margin of 44 percent to 33 percent, among the 68 British-based managers by 37 percent to 34 percent, and among the 43 Japan-based respondents by 49 percent to 37 percent.
Kerry, however, was favoured by the 96 continental Europeans by 46 percent to 33 percent, by 28 Asian Pacific- based respondents by 43 percent to 29 percent, and by 16 South African managers by 50 percent to 31 percent.The Europeans et al. may end up being right (I'm still in a rather pessimistic mood about Bush's chances), but the split also suggests the possibility that they're letting anti-American sentiment color their judgment. So once again, I'd put my money in passively-managed funds where the political dispositions of the manager cannot affect my returns.
