Research / Theme
Manager Selection: Skill vs Luck
Evaluating investment managers is one of the most persistent challenges in institutional investing. Strong historical performance is often interpreted as evidence of skill, yet outcomes are shaped by market conditions, factor exposure, and randomness as much as by decision quality.
Many selection processes rely heavily on backward-looking metrics. While necessary, these measures are insufficient for understanding whether performance reflects durable skill or favorable circumstances. As a result, institutions frequently allocate capital based on signals that fail to persist.
This research theme examines the structural difficulty of separating skill from luck in manager evaluation. It focuses on attribution, consistency, decision-making processes, and the alignment between stated philosophy and observed behavior across different market environments.
ClarityX approaches manager selection as a probabilistic and longitudinal problem rather than a ranking exercise. Understanding skill requires examining how managers perform across regimes, how they respond to stress, and whether their decisions remain coherent when conditions change.
This theme is operationalized through ClarityX's applied research platform, MARY, which evaluates managers through multi-dimensional analysis, scenario awareness, and ongoing monitoring rather than static scorecards.