I Can’t Define Short-Term Silliness But, Like Justice Stewart, I Know It When I See It by Cliff Asness, AQR
There is just way too much focus on short-term performance. The media write about it constantly, and investor flows in aggregate (not everyone!) seem to follow it too much. We certainly enjoy these stories and flows a lot more when they are in our direction (not a bad picture either, considering the source material), and certainly believe the recent inflows highlighted are a good long-term allocation (that’s mighty big of us, no!?). But we remind everyone that these decisions should be occasional, based on long-term assessments (and even if based on a tactical view, last month’s performance isn’t a great place to start!), and revised rarely. Good strategies will have bad years or even bad multi-year periods, and conversely bad ones will often shine in a world with so much short-term randomness. We (and all other managers, as we’re all in the same boat) are not as good as many implicitly believe when we did great last month (or year or even sometimes longer), and certainly not as dumb as some will think after bad times.
Just a friendly reminder to keep our eyes on the long-term prize.
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