Survivorship bias in manager selection
Why the best-looking track records can be the least informative.
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Fund databases tend to drop managers that close or stop reporting. What remains is a list of survivors, and averages calculated from survivors overstate what investors actually experienced.
When we assess a strategy, we look for the full population: the funds that closed, merged or went quiet, and the reasons why. The question is not only who succeeded, but how many tried the same approach and failed.
It is the same logic Abraham Wald applied to returning bombers: the damage you can see is the damage that was survivable.