Fund managers' performance tied to 'winning' stocks: Inalytics

Running "winning" stocks significantly affects fund manager performance, according to research released by manager evaluation firm Inalytics.

The research said "running winners" is worth five per cent per annum and fund managers with the ability to choose and hold on to "winning" stocks outperformed those without the skill.

"Winning" stocks were defined as those owned and held while appreciating in value. 

Skilful and unskilful managers varied by up to 480 bps, according to the findings.

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Inalytics chief executive Rick Di Mascio believes it may be the first time "anyone has established evidence to support the proposition that some managers are skilful," although previous research suggested that managers tend to sell their stocks too early.

Skilful fund managers get more than half their decisions right and can run their own winners as well as cut their losers, according to Inalytics who examined 760 equity portfolios from around the world.

The paper is the first in a series the company plans to publish on the nature of skills and builds on prior research into behavioural biases exhibited by stockbrokers.