Investing Is Tough, Even For Professionals
Every year, the finance industry hires the best and the brightest from highly esteemed universities all over the world.
In the U.S. alone, the financial industry has doubled in size as a share of the economy in the past 50 years. According to a study from Williams College, Indiana University, and the Treasury Department, there are almost twice as many financial professionals today in the top 1 percent of American income earners as there were in 1979.
Against this backdrop, it is understandable why top physicists, mathematicians, and engineers flock to the investment industry in search of riches as their quantitative backgrounds are highly valued in that context.
Financial institutions are armed with massive resources, brainpower, talent, and computing ability. Investors have entrusted them with the task of growing their wealth
And what has been the result for those investors?
You may be surprised by the fact that many funds disappear (via liquidation or merger) each year, often due to poor performance.
Based on data (as of 31 December 2023):
Over the past 10 Years
Out of a total of 3,022 equity funds, 1/3 (33%) failed to survive and 3/4 (75%) failed to deliver returns above their benchmark for investors.
Over the past 15 Years
Out of a total of 3,241 equity funds, about half (49%) failed to survive and almost 4/5 (79%) failed to deliver returns above their benchmark for investors.
Over the past 20 Years
Out of a total of 2,860 equity funds, more than half (55%) failed to survive and more than 82% failed to deliver returns above their benchmark for investors.
There has been many financial innovations over the past twenty years, but the dismal results suggests that these have not turned into returns for end-investors.
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