Your fund manager knows their best idea. So why aren't they betting on it?

Researchers from Harvard, IESE, and the LSE found that when fund managers invest in their highest-conviction stocks, those picks outperform the market by up to 4.5% per year.

But here's what stings: the dozens of other stocks in their portfolio show almost no outperformance at all. Managers "round out" their portfolios not because they believe in those positions — but because the industry incentivises them to.

If a skilled manager has only a handful of truly strong ideas, why pay active fees for the watered-down version?

Your returns are being diluted by stocks your manager doesn't even believe in.

The best ideas deserve a bigger seat at the table.

"Life shrinks or expands in proportion to one's courage." — Anaïs Nin

Based on "Best Ideas" — Antón, Cohen & Polk (2021)