저자: The Financial Economics · 외국인
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You know, I gave a a speech at Google a little less than two years ago, and I started it this way. I said, "Even Warren Buffett said that most people should just index." And then I said, "I agree with him." And then I left. But then I said, you know, Warren Buffett doesn't index and neither do I. How come?
Okay. And the same type of question I get every year when I'm in class, at least for the last six or seven years, someone raises their hand at Colombia and says, you know, hey, congratulations, Professor Greenblad, on a nice 37y year career, whatever it's been. Uh, great job. But, you know, now there are more hedge fund manners, there's more hedge fund managers, there's more computers, there's more analysts, there's more ability to crunch numbers.
There's uh plenty of evidence to show that active managers don't really add value over time. You know, more or less the nature of the question is, isn't the party over for us? You know, it's just so much harder now than when you uh started out. So, my students are second year MBAs, roughly 27 years old on average.
And so what I say to them is, okay, I'll tell you what. Why don't we go back, you know, 20 years when you guys learned how to read. Okay, let's take a look at the most followed market in the world. That would be the United States. Let's look at the most followed stocks within the most followed market in the world.
That would be the S&P 500 stocks. And let's take a look at what's happened since you guys learned how to read 20 years ago. And I tell them from 1997 to 2000 the S&P 500 doubled. From 2000 to 2002 it have hald. From 2002 to 2007 it doubled. From 2007 to 2009 it hald. And from 2009 to today it's more than tripled.
Which is my way of telling them that people are still crazy. And also way understating the case because the S&P 500's an average of 500 stocks. If you lift up the covers and look at the dispersion going on amongst those 500 stocks between which are in favor at any particular time and which are out of favor and how often that changes that doubling having doubling having doubling having of an average of 500 stocks is really smoothing the ride under the covers.
It's it's really pretty crazy. So if you believe what Ben Graham said that this horizontal line is fair value and this wavy line around that horizontal line are stock prices and you have a uh disciplined jelly bean counting way of valuing businesses, you know, and buying them when uh they're far enough below that horizontal line.
And if you're so inclined to sell or sell short stocks when they're above the line, the market's throwing us pitches all the time. Okay. The reason active managers don't outperform, we know a lot of them. They're behavioral, their agency problems. I sat on a lot of big investment boards. And while everyone is patient, you know, they're run by people.
Those people have three-year benchmarks. And you know, if someone's in charge of US equities or they're in charge of real estate, they're in charge of private equity or whatever, they have a three-year benchmark. And I'm not saying the good places throw you out of there when you didn't beat the benchmark.
I'm just saying they don't throw you a parade when you didn't beat the benchmark. And there's an agency problem and it's not going away. Good news for value investors. So when people ask me about, you know, the future of value investing and that's our definition of value investing, you know, active management uh in an intelligent way.
I tell them that most people uh you know are very uh don't know how to value businesses. So, if you don't know how to do that, you should do it. And then I tell them about a book I wrote called The Big Secret. And I always say it's still a big secret because no one bought it. And I tell them a couple studies in that book.
One study looked at the best performing was done by Morning Star, looked at the best performing mutual fund. I wrote it in 2011. So, it looked at the decade 2000 to 2010. The best performing mutual fund 100% long US equities for that decade was up 18% per year. The market was flat during the decade.
So beating by 18% a year was pretty good. The average investor in that fund though managed to lose 11% a year on a dollar weighted basis. And you all know how they did it, right? After the market went up, after the market went up, they piled into the fund. After the market went down, they piled out of the fund.
After the fund outperformed, they piled in. After the fund underperformed, they piled out. and they turned that 18% annual gain into an 11% dollar weighted loss. Institutions are no better. I showed a study of the top quartortile institutional managers for that same decade, 2000 to 2010. So the ones who ended up with the best 10-year record, here are the stats on those guys.
47% of those who ended up with the best 10-year record spent at least three of those 10 years in the bottom desile of performance. So three plus years in the bottom desile. So you know no one stayed with them. 79% spent at least three plus years in the bottom cortile and everyone 97% spent at least three years in the bottom half.
So to beat the market, you have to do something different than the market, your returns are going to zig and zag differently. So even if you were smart enough, okay, you don't know how to value businesses, fine. Maybe you're good at picking managers, but even if you were smart enough to pick that manager who's going to end up having the best 10ear record, almost no one stays with him.
So when I think about the future of active management uh I would say you know versus passive you know the active versus passive I would say that is uh business uh not very optimistic I there'll continue be a move to passive there'll be continue to be I'm not saying that active won't outperform for the next few years but then it won't a few years later so uh most people won't capture that and they're starting to catch on to that So, I think there'll continue to be a move to passive.
Uh, I think there'll still be a fee crunch for active. Uh, but as a stock picker, I'm super excited. You know, the more people who quit and stop trying to do this market is throwing his pitches all the time. We have these opportunities. Uh, so the good news, I'm very optimistic as a stock picker. The business of active management, you know, might might be so what, I don't know.
But uh it will continue to be challenged as it probably should you know uh and as always not everyone can uh outperform th those who are skilled to either value businesses or to find managers and have the discipline. The big secret by the way so you don't have to buy the book. Not that you could I could I can't even give it away.
So um the the big secret uh is patience. Okay. Find a strategy that makes sense to you and have the discipline to stick with it. That's few and far between. Beating the market is hard because most people don't know how to properly value a business. Stock prices already reflect what most investors think.
So, finding hidden opportunities is tough. Many rely on trends or emotions instead of looking at the real value of a company. To do better than the market, you need a unique approach like spotting undervalued businesses or using a strategy others overlook. Following the crowd usually does not work because it often leads to bad timing like buying high and selling low.
Successful investors think differently and stay focused even when others doubt them. In the end, as Joel Greenbath says, beating the market takes both skill and discipline.
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