A new study has reported the surprising finding that a disadvantaged background is linked to improved performance among fund managers.
A new study of fund managers suggests that the best ones come from more humble backgrounds.
The study’s authors, finance expert Oleg Chuprinin, from the University of New South Wales Business School, and Denis Sosyura, from the University of Michigan, say their results hold up whichever way you manage fund performance.
They also have an explanation for their result: “Managers born poor face higher entry barriers into asset management, and only the most skilled succeed.”
Their data lend support to that story. Notably, of the fund managers they studied, managers from wealthy families had much more mixed results than those from poorer backgrounds.
The managers born to wealth were also more likely to be promoted, even if their results were below average; those born poor, on the other hand, were promoted only if they outperformed. In other words, fund managers from poor families need to be good or they don’t progress.
The study – Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds – does have some limitations. It looks only at 357 US fund managers born before 1946, since this is the group for which parental income records are available. The youngest of these managers is now at least 70.
Today’s fund managers may have been put through a more merit-based filter.
Nevertheless, if you’re shopping for someone to manage your nest egg, it might be worth asking them to reminisce about their time growing up.
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