Skip to Content
Fund Spy

Think Twice Before You Ditch That Laggard Fund in Your Portfolio

Our research finds that “hired” funds underperformed “fired” funds in future periods, on average.

Executive Summary

  • An influential 2008 study found that institutions lacked skill in hiring and firing investment managers. In subsequent periods, hired managers underperformed fired managers.
  • This piece examines whether mutual fund investors are skilled in hiring and firing managers, with funds’ organic growth rates serving as a proxy for hiring and firing.
  • Our study of active U.S. stock funds found that fund investors had a propensity to “hire” funds that outperformed in recent three-year periods and “fire” those that underperformed.
  • However, as with institutional managers, the “fired” funds went on to outperform the “hired” funds in subsequent years. After taking fund mortality into account, “hired” funds were only slightly more likely to succeed than “fired” funds after the hiring/firing decision.
  • The findings are yet another reminder that past performance alone doesn’t suffice when deciding which funds to buy and sell. 

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.