Essay
Why Manager Selection Breaks Down Over Time
Parson Tang
Manager selection is often treated as a discrete event: evaluate historical performance, assess philosophy, conduct due diligence, and allocate capital. In practice, the challenge is not selection at a point in time, but maintaining alignment as conditions evolve.
Many managers are chosen for reasons that are valid within a specific environment. Their strategies perform well under certain liquidity conditions, factor regimes, or volatility structures. Over time, however, the environment that supported their success changes—sometimes gradually, sometimes abruptly.
Institutional processes tend to lag these shifts. Performance evaluation relies heavily on backward-looking metrics, while changes in decision-making quality are harder to detect. As a result, capital often remains allocated to managers whose strategies no longer fit the prevailing conditions.
Another source of breakdown is organizational inertia. Once a manager is selected, governance structures can discourage reassessment. Relationships, reputational considerations, and the desire to avoid appearing reactive all contribute to delayed action.
Manager skill is not static. It depends on how consistently decisions align with stated philosophy, how strategies adapt under stress, and whether risk-taking remains disciplined as opportunities change. Without continuous evaluation, institutions risk confusing persistence with competence.
At ClarityX, we view manager selection as an ongoing reasoning problem rather than a one-time decision. Effective oversight requires longitudinal analysis, regime awareness, and the willingness to challenge assumptions before underperformance becomes obvious.
This perspective emphasizes monitoring over ranking and understanding over attribution—an approach that aligns capital with enduring capability rather than past outcomes.