One big source of tension for today's portfolio managers is the conflict between the business of investing (revenue and profit) and the craft of investing (performance). Over the long term, these goals are not mutually exclusive: the best marketing tool is a superior long-term record. Over the short term, however, the conflict can encourage decisions that hurt long-term investment performance and, with it, portfolio managers and clients alike.
Specifically, with the investment business getting ever more competitive and investors ever more impatient, portfolio managers feel pressure to concentrate on ever shorter timeframes. Gone are the days when managers were judged on five-year and 10-year records: They now live and die on performance posted over years, quarters, and months.
Unfortunately, if portfolio managers adapt their styles to address these realities – as most can be forgiven for doing – they will often also sacrifice the discipline that provides the best chance...
