Nervous Active Fund Managers and the Rally
Richard Shaw (June 18th, 2009) Writes:
Several commentators on Bloomberg TV have attributed significant force in the recent rally to short covering and to nervous active mutual fund and pension fund managers whose compensation (and in severe cases, jobs) are at risk if they under-perform the market on a short-term basis.
There is no question that most active managers are compensated in part based on performance relative to market benchmarks, and that their continued employment is contingent of not falling too far behind for too long. The greater the expense ratio of the fund, the greater the stress they feel as they try of make out-performing selections to overcome their built in under-performance due to expenses.
Let’s look at some data to see how fund managers have performed over the last 20 days, and how plausible the “nervous managers” explanation for part of the rally may be. This is a crude measure, but somewhat illuminating.
We measured the ratio
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![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)




