When it comes to Investment Managers, the natural assumption to make is that those who outperform over the long term are skilled.

That may be the natural assumption to make, but it is wrong. In this paper, we show that the vast majority of managers with very strong past performance lack the skill to outperform reliably in the future. In fact, only 20% of the managers with very strong past performance are skilled investors. This finding raises the question: why do so many investors rely on past performance, when it contains so little information?