“Ignorance more frequently begets confidence than does knowledge.” – Charles Darwin

In the last article, we looked at the first step in identifying All Star Fund Managers – getting rid of the bottom 90% of fund managers/investors. This article is about the final 3 steps in the process that take us from the top 10% to a team of All Star Fund Managers.

All the comments here are my personal opinion. There are many exceptions to most of them, but from our years of experience, we believe all of them to be generally true.

Step 2: Identify the Top 1-2%:

This step is focused on identifying the fund managers that use the most effective strategies and methods.

High “Active Share – A study by Yale researchers showed that the more different a fund manager’s holdings are from the index, the more likely they will beat it. Of the funds that had only 0-20% of their holdings in common with the index, the average fund beat the index.²

Wisdom/Insight – Most top fund managers are in their 50s and 60s, since it usually takes many years of experience to learn to avoid the common investing mistakes, make the necessary contacts and gain the deep insights necessary to be a top fund manager. Being through a few market cycles can provide insight. We are looking for a fund manager to be disciplined, avoid getting caught up in fads or focusing on popular sectors, show wisdom to be cautious during the strong bull markets and confident after crashes, and generally have a deep insight into investing.

More likely value investors – Fund Managers using a value style of investing are more likely to be All Star Fund Managers. They value companies as a business, not as a stock, and figure out a conservative “intrinsic” value to buy the company as a whole. Then they only invest if they can get a big discount (buying $1 for 50 cents), which they call a “margin of safety”. Warren Buffett recognized decades ago that, while there are many investment styles, “Graham and Dodd” value investors are a disproportionately large percentage of the top investors.¹

Stock pickers, not industry pickers – Bottom-up, not top-down. Many fund managers start by identifying the countries and sectors where they see the best opportunities and then choose the best stocks in those areas. The top fund managers find the companies that are the best opportunities and let that determine their allocation. They are usually stock pickers.

Get rid of index-timers – Some fund managers try to market-time sectors either by actively switching between several ETFs or index holdings, or between key stocks in several sectors. In addition, “sector-rotators” switch between sectors based on the economic cycle. A Yale study² confirmed our experience that these strategies generally don’t add value. This is another form of “top-down” investing. Top fund managers generally do not market time sectors or use ETFs. ETFs are generally for amateurs, market-timers and investors not skilled in stock picking. Top fund managers are stock pickers and will prefer the companies they know intimately to owning an entire sector.

Look for focused portfolios – The average Canadian equity fund holds 99 stocks and the average global fund has 382. However, studies show you can get good diversification with 20-30 stocks. Fund managers cannot intimately know a lot of stocks. Is their 100th best choice really as good as owning more of the 30th best? Top fund managers tend to know their top companies intimately and have a lot of confidence in them, and therefore tend to have focused portfolios in fewer companies.

Understand & measure risk – It is important to understand the risk level a fund manager is taking to achieve his return. This is much more than looking at the hundreds of risk statistics, since they will be much different in good and bad markets, and when the fund manager’s style is out of favour. Some fund managers beat their index just by being more aggressive than their index. Some fund managers believe in and are always loaded up with one sector and may look good when that sector is in favour. Some fund companies have risky funds in several sectors knowing at any time one or the other will probably do well. Risk is lower when you know what you are doing. Top fund managers always understand and measure the risks they are taking and have systems/disciplines to control risk without dragging down performance.

Step 3: Identify the All Star Fund Managers:

This step is focused on the fund manager himself and to identify the skilled stock-pickers.

Look for the fund manager to have his own money in his fund – If the fund manager does not have his money in his fund, why should you? This is another issue with employee fund managers that often don’t invest in their own fund because of interference from their bosses.

Know how they beat their index – Most top fund managers know why they beat the index over time. It is usually either superior stock-picking or a systematic inefficiency in the index that they can tell us about.

Passion – The best investors are usually passionate about investing, work long hours, travel extensively, are voracious readers and know their investments intimately.

Integrity – It is surprising how important integrity is. A passionate fund manager without integrity may be focused on making money for himself, instead of for us. Integrity means they believe in what they do, they stick to their style even when it is out of favour (no “style drift”), invest their own money in their fund, and are focused on long term returns and not on making their fund easy to market. They are clearly part of the profession or investing, not the business of investing.

Confident, but not over-confident – The most brilliant fund managers often have an understated confidence about them that may make them easy to overlook at first. “Hubris”, or arrogant overconfidence, can happen to a fund manager after a lucky streak or if he starts believing his own press. Hubris is sometimes called the “pride that blinds”. We avoided one disaster by not investing with one fund manager who had an awesome track record but was just too arrogant. Top fund managers are focused on their investments – not on themselves.

Study hundreds of stats – Stats can identify issues and differences between different fund managers that can help understand them. The problem with analyzing stats is that they are all focused on recent data. Therefore, no matter how much you analyze statistics, you tend to come up with whoever did better recently. Since we are looking for superior skill, we need to filter out recent performance, being over-weight in recently hot areas, and currency effects to try to identify stock-picking skill. We also need to study risk and return stats in different market conditions.

Meet the fund manager – It is critical to know what kind of person a fund manager is. I like to have my wife, a personal coach, meet fund managers to provide more insight. We are looking for intelligence (above-average is all that is necessary), ethical (this is critical), hard-working, experienced (generally at least 10 years, and 20-30 or more is better), a well-defined process, deep market wisdom/insight and usually a kind of under-stated, humble confidence. The most dangerous combination is smart and hard-working, but not ethical. Warren Buffett says an IQ up to 125 (a bit above average) is helpful, but there is no evidence of any advantage beyond that. Wisdom and insight provide a vital long term focus. We can’t be truly confident in a fund manager without meeting him.

Step 4: Match the ones that work well together:

Correlation & similarity – Each fund must invest differently from the others – different countries or sectors, different size companies or different investing styles. They should perform best in different market conditions. If two are similar, you only need one of them. The theory is that, if you have 2 fund managers that both make 10%/year over time but have their good and bad years at different times, then you will make the 10%/year with less ups and downs than either of the funds.

Teams of All Stars for different people – We must combine several All Star Fund Managers into a portfolio suitable for different clients, depending on their risk tolerance, portfolio size and goals.

I realize that some of these are controversial, but we have found all of these to be very helpful and generally true in identifying All Star Fund Managers. Most are also useful to evaluate various investing strategies and to know whether the guy at the party is really a good investor.

While it is true that the average fund manager usually makes less than the index, we believe the solution is investing with fund managers that are exceptional stock pickers. Many investors look for the lowest- cost investments by picking their own stocks or ETFs. However, studies show that amateur investors on average make far less than the “average” fund manager, mainly because they make many of the mistakes listed in this article. For example, the Dalbar study ³ shows that the average investor makes only about 1/3 of the gains of the average mutual fund.

In short, the average fund manager makes less than the index, but we believe the solution to “average” is not “amateur”. The solution to “average” is “All Star”.

From experience, we have found that having confidence in your investments is probably the single biggest factor in successful investing, mostly because it leads to effective behaviours. Whatever investment process you choose, you need to have the confidence to remain invested through the inevitable bear markets.

Investing with All Star Fund Managers gives us a lot of confidence. This confidence allows us to have a higher proportion in equities (often 100% equities), invest larger amounts of money, and most importantly, stay invested in down and difficult markets with confidence.

Just like the confidence a solid financial plan brings to the likelihood of reaching your long term goals, the confidence inspired from our rigorous ‘All Star Fund Manager’ selection process also increases the confidence with which we can ride out the inevitable spells of turbulence and remain focused on their financial plans. After all, if you have done your research well, the time to change a fund manager is definitely NOT simply due to recent events in the news. You should be able to confidently remain invested with the fund manager unless the key underlying attributes that first attracted you to a manager have changed.

¹Classic article “The Superinvestors of Graham & Doddsville” – Warren Buffett (http://www.edrempel.com/pdfs/Active%20Share%20Study%20-%20How%20Active%20Is%20Your%20Fund%20Manager.pdf)

²Yale study “How active is your fund manager? A new measure that predicts performance.” – Martijn Kremers and Antti Petajisto (http://www.edrempel.com/pdfs/Active%20Share%20Study%20-%20How%20Active%20Is%20Your%20Fund%20Manager.pdf)

³ Dalbar study: Quantitative Analysis of Investor Behaviour (QAIB) http://www.qaib.com/public/freelook.aspx?

Disclaimer: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Opinions expressed are the personal opinion of Ed Rempel.

About the Author: Ed Rempel is a Certified Financial Planner (CFP) and Certified Management Accountant (CMA) who built his practice by providing his clients solid, comprehensive financial plans and personal coaching.  If you would like to contact Ed, you can leave a comment in this post, or visit his website EdRempel.com.  You can read his other articles here.


  1. sell textbooks on February 23, 2011 at 12:32 pm

    My Father was one of which you speak. He taught me many great things. He is in his 60’s a VP at Merrill Lynch and had his own team. They were the only group on the east coast that every possible certification available and could handle and any financial situation you could think of. I could tell you some stories, but his clients aren’t to shabby. At least the ones he lets me know about.

    He had me learning the market at 5. He let me pick out a stock, I chose Disney, what 5 year old wouldn’t. My brother Chose Image Comics. Read the reports had no clue what they said, but it made me feel smart. Disney has split and doubled I don’t know how many times, and has been great. I own quite a bit in Disney now that I am 30. My Brother sold Image Comics right before DC Comics bought it out and made a really great profit off it, my father was actually shocked my brother made out so well on a comic book firm.

    But you are right go with the older guys, mutual funds are a good thing, don’t put all your eggs in one basket, diversify and C.Y.A. Day trading is never a good thing, unless you got money like that to blow, you might as well go to the horse track at least it will be more fun and you have a better chance of winning.

  2. Jen Green on February 23, 2011 at 1:52 pm

    Fantastic article! Thank you so much for posting all these tips. After all, money is what everyone’s thinking about these days… how to get it, and then once you have it, how to keep it, and how to grow it. Trusting someone with it is probably the most difficult thing to do these day, but knowing how to identify someone as worthy, is definitely the first step. Thank you so much!

  3. Andrew F on February 23, 2011 at 1:54 pm

    Yes, the average retailer investor does very poorly indeed. But you’re guilty of not examining each strategy used by retail investors, just as you complained that people lump your all-stars with the closet indexers. I suspect most of the least sophisticated retail investors who don’t use fund managers use a strategy of buying whatever hot stock they heard about on the news. Usually this happens just as the stock is peaking. You’d almost think the business media were in on this as a pump-and-dump scheme.

    I’d be interested in seeing how the average buy-and-hold index retail investor does. It’s quite possible that these people would also lag the market if they are not disciplined and shift their portfolio weights with each asset class fad.

    Forgive me for being skeptical about the art of picking the fund managers guaranteed to outperform going forward.

  4. DanP on February 23, 2011 at 5:14 pm

    I think one of the biggest flaws of retail investors is the emotion. They dont have someone there telling them not to sell because their funds are down in the interim. I dont know how many ppl come into my office and say they want to buy more of “fund a” because it did 10% last year, but “fund b” did 5%. That’s usually the problem with most retail investors…they chase returns/stocks. I cant believe how many convos i had around gold in the past 6 months, and like andrew said, if its in the news, it’s probably too late already.

    Now this debate of etf vs mutual funds. The problem is that advisors have to sell mutual funds to get paid. They cant give out free advise. If you go to a fee only advisor who uses ETFs, the problem becomes you have to have alot of money to make it worth you while, and most people dont. So mutual funds have a great place in most ppls finances as they are better than term deposits, and if your not a well informed person, you shouldnt be building your own porfolio.
    I do find it odd that “Jen Green” links to a temporary tattoo website. Seems sketchy.

  5. JFG on February 23, 2011 at 9:08 pm

    For me, it’s just an example of “over thinking it”. Most people can’t find a decent manager, let alone the “best”. I have the same problem as DanP; Clients wanting the buy yesterday’s winner, which will be tomorrow’s mediocre fund. Heck, it might get bought out by a bank and now you don’t want to touch it with a 10 foot pole.

  6. Ed Rempel on February 23, 2011 at 11:32 pm

    Hi textbooks,

    Interesting story. Was your father an advisor or a fund manager?

    I have heard a few stories of someone knowing a great investor for many years and for one reason or another, never invested with him. I’m curious – did you invest with your father?


  7. Ed Rempel on February 23, 2011 at 11:57 pm

    Hi Andrew,

    I have not examined every strategy used by retail investors. I see it like many other fields. There may be an amateur hockey player that can score better than Sidney Crosby, but it is unlikely and how would I find him?

    If I want to identify the world’s best hockey player, I would start with professional hockey players in the NHL or European leagues. Non-professionals would not get the same experience and practice as professionals, or the opportunity to play against other professionals.

    There must be all kinds of strategies, but most retail investors use a few basic strategies. Few retail investors do much research at all other than looking up some info on the internet, which is probably already fully built into the stock price. It is hard to believe that any strategy that based solely on publicly available information can outperform.

    I am not aware of a study strictly on buy-and-hold index investors, but studies such as John Bogle’s study, “Investors are Getting Killed in ETFs” (http://www.indexuniverse.com/sections/news/6012-bogle-investors-are-getting-killed-in-etfs.html ) show that the average ETF investor makes about 4.5%/year less than the average index mutual fund investor. Clearly many of them are not buy-and-hold.

    Of course, the average index mutual fund investor will also make less than the indexes as well – partly because of fees, but also because of bad market timing and buying at the wrong time.

    I would guess that even buy-and-hold index investors would make quite a bit less than the index. They would still tend to buy the index that has performed well recently. Therefore, even if they hold it for 20 years, they are likely to underperform the first 5 years or so because of buying high.

    I did not say the All Star Fund Managers are guaranteed to outperform going forward. I just think they are more likely to.

    I don’t know which hockey player will score the most goals next season, but if my money is on Sidney Crosby, I think my odds are better than anyone else I can think of – and certainly better than if my money is on an average player or an amateur player.

    Investing often seems so simple that so many people think they are good at it. I find comparisons to other fields, such as hockey, informative as a comparison.


  8. Ed Rempel on February 24, 2011 at 12:36 am

    Hi DanP & JFG,

    Every advisor will have that issue with clients wanting to buy last year’s winners. We have found that investing with All Star Fund Managers reframes the question back to a productive question.

    The entire concept of choosing what sector or geographic region or category of investment is an underperforming strategy. Partly this is because investors tend to make the wrong choices, but also because the right way to make this choice is bottom-up – by picking the best stocks and letting that determine the allocation.

    For example, if I can find a tech company with a 35%/year profit growth, a P/E of 8, zero debt and passionate management, that sounds like a great investment regardless of what I think about that sector in general.

    More important is the question of who is making the ultimate investment choice. If I as an advisor am choosing to allocate x percent to resources and x percent to small caps and x percent to Canada, etc. etc., then I am the one making the ultimate investment decisions.

    Like nearly all financial advisors, investment advisors or stock brokers, I am really an amateur investor. I don’t even have a degree in investment. I believe the ultimate investment decisions should be made by the fund managers, not the advisors. The fund managers are the professional investors.

    Therefore, except for the most aggressive investors, we find several more broad-based funds managed by a fund managers we believe is an All Stars and let them decide the allocation.

    For example, instead of deciding of me deciding what percent should be in resources, I will invest in a Canadian small cap fund. The fund manager makes the allocation decision and he is a far better investor than I. He is selecting his holdings one-by-one, instead of by starting with the sector allocation.

    Now the fund manager is the ultimate investor – not me. That is a critical difference that I believe is very important to success.

    Then when a client wants to invest in gold, I can show the client what the fund manager is buying right now. If there are great deals in gold companies, the fund manager is at the centre of the action and he will increase his allocation to gold. If he is finding better investments in companies in other sectors, then we would rather be invested in those companies.

    With this strategy, the focus is on the stock-picking skill of the fund manager, not on which sector I or the client thinks might do well.


  9. Ed Rempel on February 24, 2011 at 12:38 am

    Hi DanP,

    Jen Green may be part of a temporary tattoo web site, but I think she is the only non-advisor making comments here! :)


  10. Andrew F on February 24, 2011 at 1:37 am

    Ed, you just said that index investors could underperform the index for the first five years by buying the index. This is nonsense (beyond any MER and tracking error) by construction.

  11. Ed Rempel on February 24, 2011 at 3:11 am

    Hi Andrew,

    My point is that an index investor may underperform for the first 5 years in general, not that they may underperform the specific index they own.

    With index investing, you still need to decide which index to invest in. Most index investors choose indexes that have done well recently, which probably means they may underperform going forward.

    For example, instead of staying diversified by owning an MSCI World index ETF, and investor may specialize by putting 50% in Canada (or some sector or region) and 50% MSCI World. He does that because Canada has been doing well recently, so he is buying high. Then the next 5 years, things normalize and Canada underperforms the World index.

    In short, the index selection decision led to underperforming in general.

    One study I saw showed that most investments are purchased at the wrong time. It concluded that you should always assume that you bought every investment at the wrong time, so you should expect every investment to underperform in the first 5 years you own it.

    This may be a bit extreme, but the general point is very accurate – most investments are bought at the wrong time with the investor buying high because the investment has been “doing well” recently.

    The other issue of index selection is that some of it is counter-intuitive. Index investors usually assume buying several ETFs gives them more diversification. Often, adding more ETFs REDUCES diversification.

    In the example above, the investor with 50% MSCI World index and 50% Canada is heavily overweight in resources and banks and actually LESS diversified with 2 ETFs than with one.

    The MSCI World index is quite diversified. Adding other indexes to it very often REDUCE diversification by overweighting a sector or region.

    It is the index selection decision and market timing of ETFs that are the biggest issues with index investing.


  12. Andrew F on February 24, 2011 at 1:32 pm

    Perhaps, Ed. But you’re begging the question. Of course an undisciplined investor will make the common mistakes identified in behavioural finance. Same goes for investors following an active fund manager approach. You’re comparing undisciplined index investing to disciplined ‘secret-sauce’ active fund manager investing. If an investor is incapable of disciplined index investing, how would one expect them to be disciplined enough not to chase hot fund managers and withdraw from funds that have had a bad year?

    A disciplined index investor with a well-constructed model portfolio can match index returns, and beat the index in return with the same risk with leverage and market timing.

    I’ll allow that there are certainly areas of the market that are less efficient that lend themselves to active investing by experts in that area. Those areas include preferred shares, small caps, emerging markets, etc. But let’s see the preponderance of ‘all-stars’ that invest in the S&P 500.

  13. Chris on February 24, 2011 at 4:41 pm

    Okay… so here’s the thing – I’ve read stuff like this in several places, “Don’t invest in mutual funds that perform well, invest in fund managers who perform well.” You mention it here, David Chilton brings it up in The Wealthy Barber, and so on. However, no one that espouses this philosophy actual goes on to say which fund managers are doing the best or where we all can go to find out who these people are. Morningstar is great for looking at the performance of funds themselves, but they don’t really have anything on specific fund managers. The way you’re talking, really what everyone should be doing is writing about top performing managers and not their funds. So my question is, where do you recommend all the little people go to find out who is doing the best at managing their funds?

  14. Ed Rempel on February 25, 2011 at 1:22 am

    Hi Andrew,

    That’s a good point. The difference, though, is that the most effective way to decide on the allocation is bottom-up – by picking the stocks and letting that determine the allocation.

    Of course you can have undisciplined investors with any style. I agree. However, with index investments, you can only make top-down allocation decisions – which is an ineffective process.

    The Yale study on Active Share showed that even fund managers that used strategies based on allocating by sector first on average added no value over the average fund manager.

    Possibly the most effective, diversified index strategy is to just own the MSCI World index and hold it forever. It may seem boring, so how many index investors would do that? Adding other indexes means you are making a top-down call on a sector or region. It also probably REDUCES diversification by over-weighting that sector or region.

    With an All Star Fund Manager, he can search for the best stocks and make the allocation based on that.

    We normally choose fund managers with broader mandates, so they can determine the allocation. Most top fund managers don’t fit neatly into an index comparison. We can choose a fund manager that can buy large, mid and small cap stocks. We can choose one that is global, but takes large positions in regions.

    The main point is that he is choosing the allocation bottom-up – stock-by-stock. Top fund managers are almost always primarily great stock pickers and it is the stock pickers that tend to outperform.


  15. Ed Rempel on February 25, 2011 at 1:23 am

    Hi Andrew,

    I was rereading your post and I don’t understand this part:

    A disciplined index investor with a well-constructed model portfolio can match index returns, and beat the index in return with the same risk with leverage and market timing.

    What do you mean “with leverage and market timing”?


  16. Andrew F on February 25, 2011 at 1:34 am

    By leverage I mean leverage, ie margin, etc. By market timing I mean moving to cash when the market breaks trend, ie falling below a longer term moving average. The latter reduces risk, while the former increases it. Based on some analysis, you can use at most 2x leverage (and often less) to get about the risk as buy and hold and better returns. Without leverage you would typically only match returns with lower volatility, drawdowns, etc.

  17. Ed Rempel on February 25, 2011 at 1:39 am

    Hi Chris,

    I agree with you that data on mutual funds is very over-simplified. It is all based on the fund and not the fund manager.

    When you invest in a mutual fund, it is not like buying an ETF. You are hiring a fund manager. Some have skill and many don’t really. If you always picture a fund by picturing the fund manager, meeting him, understanding his strategy, etc., then you can understand what you are buying with a mutual fund.

    It takes research to figure out the top fund managers, starting with looking at the manager for each fund. Data on mutual funds will usually show when the current manager started. In most cases, you can only use data for a fund since the current fund manager started. To track a fund manager, you may need to track his performance through several funds.

    That is one of the main problems with trying to pick mutual funds by using public software. It tends to all show the fund, not the fund manager.

    The same thing tends to happen with stocks. Stock data doesn’t normally mention how long the current CEO has been in charge, or if there was a major management change or a major shareholder change. These changes can also mean the company may have fundamentally changed, so you should then only look at data since the management change.


  18. sell textbooks on February 25, 2011 at 2:23 pm

    @Ed Rempel

    he was everything and the top broker in his firm, his group now handles his book since he retired. He really knew his stuff and worked hard.

    I didn’t invest with him except for the fund he set up for me to put my money from when I worked and he matched it every-time. And the Disney stock he bought me to teach me about the market since I was 5. That has all been liquidated.

    It isn’t wise to invest with family or friends, it gets in the relationship, my father only helped out a few family friends and never any family. People get upset and why put yourself in that position. The Maket changes and is never a sure thing.

  19. JFG on February 25, 2011 at 6:32 pm

    This is probably why I hold most of my holdings in ETF’s. TSX 60 is the 60 biggest, no matter the sector. Yes, we all know even that can get, well, weird. (Nortel anyone?). But in the long run!!! Boring, but the returns with the steady stream of dividend is hard to beat.

    And I like the fact that I don’t have to find a manager, read thru hundreds of report (Oh my wife still reminds me of the stacks of reports I had before they mostly went on-line) and worry.

    Much simpler then your method with similar results.

  20. Ed Rempel on March 1, 2011 at 5:59 pm

    Hi JFG,

    We don’t actually even consider Canadian large cap to be a core holding. It is 50% resources and 30% financials, so nowhere close to a properly diversified portfolio. We find the Canadian large cap is almost entirely “closet indexers” and we get far better performance from Canadian equity fund managers that are not purely large cap.

    Our core holding would be a global equity, or a global all-cap fund that can invest in large and small companies all over the world. This gives them a universe of 13,000 stocks, instead of a universe of only 60.

    Fund managers with a large universe have a lot more opportunity to outperform. The venturing away from large caps in the largest developed countries provides much less efficient markets that are easier to beat.

    The TSX is essentially a resource sector fund (primarily). Resources have been on the upside of their cycle for the last few years, so the TSX has done well. But considering the risk from not diversifying, it is not that hard to get better performance with similar risk.

    For example, the MSCI World Small Cap index has had returns similar to the TSX and is actually slightly less risky. It is smaller companies with much more growth potential, but far more diversified. Even in the recent very strong resource market, the TSX has lagged the MSCI World Small Cap Index and also has a higher standard deviation.

    To create a better comparison, if you put 30% into a resource index and 70% into the MSCI World Small Cap Index, you get a similar over-weight in resources. Over the last 10 years, this portfolio made 8.9%/year vs. only 4.9%/year for the TSX – again with lower risk (standard deviation).

    For a more extreme example, the MSCI Emerging Markets Index has far outperformed the TSX and is only slightly more risky than the TSX. It is in less developed markets and somewhat smaller companies, but is far more diversified – so the volatility is only slightly higher.

    My point is that the TSX, in our opinion, should not be a core holding since it is not at all diversified. Only the “home bias” in Canada allows investors to somehow convince themselves that it is “safe”.

    You can beat it quite easily with less risk by investing in global mid/small caps, Canadian-focused or Canadian mid/small caps, or even emerging markets that all have much more growth potential and are far more diversified.

    Global mid/small caps and emerging markets are also far less efficient and much broader, so there is a lot more opportunity for an All Star Fund Manager to shine.


  21. CanadianInvestor on October 28, 2011 at 12:04 pm

    Excellent article, well written and makes sense. OK, I’ll bite, what is the answer to the $64,000 question (or maybe it should be the million dollar question?), Who are they? Name some names. A while back I read a very interesting book Stock Market Superstars by Bob Thompson (my review – http://canadianfinancialdiy.blogspot.com/2009/01/book-review-stock-market-superstars-by.html). His list – Tim McElwaine, Wayne Deans, Rohit Segal, Eric Sprott, Irwin Michael, Frank Mersch, Peter Puccetti, Allan Jacobs, Tom Stanley, Herb & Randall Abramson, Normand Lamarche, John Thiessen & Jeff McCord. Do you agree? Any others?

  22. Ed Rempel on October 31, 2011 at 2:07 am

    Hi Canadian Investor,

    Thanks. I’m glad you found it useful.

    Unfortunately, I can’t discuss our specific list with you. We prefer to keep our All Star Fund Managers confidential, mainly because it is part of our “special sauce”.

    I can tell you that your list is pretty good. Most of them are fascinating and definitely among the best of the local investors. They are all Canadian fund managers that invest mainly in Canada. If you look at fund managers that are located outside Canada and/or invest outside of Canada, there is a another, broader list.

    We do invest with several of the fund managers on your list in specialized or very aggressive portfolios. Most of them are too aggressive to be core fund managers, except for very aggressive investors. For example, a few on your list are primarily hedge fund managers.


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