When hiring a fund manager with a conviction can be a good thing.
Apr 1st, 2007 | Filed under: 130/30“High conviction”. The very term conjures up images of Martha Stewart, Bernie Ebbers or some hedge fund blow up. But the term is also being used to describe an emerging alpha-centric approach to investing. In this case, however, “high conviction” refers to the manager’s belief in their stock picks, not to the likelihood of them getting nailed for insider trading.
While the idea isn’t rocket science, it captures the essence of alpha-centric investing - shunning the benchmark and going out on a limb instead. Successful or not, it’s why you should be paying your manager. As Alexander Ineichen points out, there’s no skill required to manage a benchmark.
We found this white paper by Fortis, a European banking and insurance firm, makes the case for conviction. Fortis launched its high conviction offering in response to what it says was a “disappointment with perceived ‘benchmark hugging’ by supposedly actively managed funds.” To which we say “Amen”.
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