Our portfolio manager assessment identifies the top five investment decision-makers.
We are pleased to announce the results of our second-quarter 2024 Behavioral Alpha® Benchmark ranking, which recognizes active equity mutual fund portfolio managers who have demonstrated superior investment decision-making skills over a 36-month period. Using our proprietary, peer-reviewed Behavioral Alpha Benchmark methodology, the ranking considers the value added (or destroyed) by individual investment decisions, rather than traditional performance-based metrics derived from historical returns (and thus subject to the random effects of luck).
The most recent assessment concluded on June 30, 2024 and measured the demonstrated skill of 88 active equity mutual fund portfolio managers.
The five highest-scoring managers, represented by the magenta dots, are those towards the upper-right on this frontier diagram — furthest away from 0,0.
The five managers with the highest aggregate scores across all decision types are recognized as top performers in the Q2 2024 Behavioral Alpha Benchmark ranking, and are as follows:
| Rank | Manager(s) | Portfolio (Benchmark) |
| 1 | Mark Sherlock Henry Biddle Michael Russell |
Federated Hermes – U.S. SMID Fund (Russell 2500) |
| 2 | Paul Viera |
Harbor Capital Advisors/EARNEST Partners – Small Cap Value Fund (Russell 2000 Value) |
| 3 | David Schuster |
Brown Advisory – Small-Cap Fundamental Value Fund (Russell 2000 Value) |
| 4 | Andrew Hall Emily Roberts |
Invesco – Global Equity Fund (UK) (MSCI ACWI) |
| 5 | Raphaël Moreau |
Amiral Gestion – Sextant PME (MSCI EMU Micro Cap) |
Highlights of the Q2 2024 assessment:
- For the sixth consecutive quarter, a majority of participating managers achieved Behavioral Alpha Scores above 50 (i.e., they added value through their decision-making compared to their benchmarks). This score is more meaningful than ever — Essentia’s latest research finds a statistically significant link between a score above 50 and a manager’s odds of outperforming a low-scoring manager over the next 12 months.
- The Federated Hermes team ranked No. 1 for the third straight assessment, the longest any fund has continuously held the top spot. They had an overall decision hit rate of 44% and a decision payoff ratio of 281% — for a combined Behavioral Alpha Score of 68.5. In other words, while only 44% of their decisions added value, those that did added 2.81 times as much value, on average, as their bad decisions destroyed.
- Raphaël Moreau of Amiral Gestion is appearing in the Top 5 for the first time. His decision-making earned him a Behavioral Alpha Score of 62.1.
- With a median BA Score of 56.1, value managers added significantly more value vs their benchmarks than growth (48.1) or blend managers (49.8)*. While we have yet to prove statistically why that is, one hypothesis is that it reflects the impact of index concentration on growth and blend managers.
- These results are publicly available through Essentia Insight’s Behavioral Alpha Benchmark app, which provides access to all 300 mutual funds, active ETFs and SMAs in the Benchmark database. And, with our new Insight Pro tier, you can drill down on a portfolio’s Behavioral Alpha Score for deeper visibility into which decision types have been adding and destroying the most value.
* Using a Kruskal-Wallis test, we found that the overall variation in median BA Scores among styles was statistically significant (p = 0.00083). Specifically, pairwise Mann-Whitney U tests further highlighted that blend and value funds, as well as value and growth funds, had significantly different BA scores, with p-values of 0.00063 and 0.00021, respectively.
How the BA Score is Calculated
The Behavioral Alpha Score uses daily holdings data to evaluate seven key decision types: stock picking, entry timing, sizing, scaling in, size adjusting, scaling out and exit timing. Each decision type is isolated and its impact on the portfolio’s performance vs its benchmark is measured and compared with what would have been achieved by chance, using decision attribution analysis techniques developed in conjunction with hundreds of portfolio managers over the past ten years.
Managers are assigned a Behavioral Alpha Score based on the hit rate (percentage of decisions that have added value) and payoff ratio (the ratio of value added by the average good decision to the value destroyed by the average bad decision) for each decision type, when compared with what would have been achieved by chance. Note that these calculations are all done relative to the portfolio’s stated benchmark.
Portfolios with Behavioral Alpha Scores > 50 (which appear to the right of the dotted line) have managers who have been adding value through their overall decision-making over the last three years. Those with scores < 50 (to the left of the line) have been destroying value.
Aggregate trends from our prior rankings:
| Percent of portfolios adding value |
Percent of portfolios with a hit rate over 50% |
Percent of portfolios with a payoff over 100% |
|
| Ending 2024-Q2 | 55.7% | 21.6% | 63.6% |
| Ending 2024-Q1 | 56.9% | 25.0% | 65.3% |
| Ending 2023-Q4 | 52.5% | 30.8% | 62.5% |
| Ending 2023-Q3 | 53.3% | 24.4% | 67.8% |
| Ending 2023-Q2 | 56.5% | 28.2% | 71.8% |
| Ending 2023-Q1 | 63.6% | 28.4% | 79.5% |
| Ending 2022-Q4 | 46.7% | 23.3% | 63.3% |
| Ending 2022-Q1 | 43.4% | 18.4% | 68.4% |
About Essentia Analytics
Essentia Analytics is the leading provider of behavioral data analytics services to professional investors and allocators of capital. Led by a team of experts in investment management, technology and behavioral science, Essentia combines next-generation decision attribution analytics technology with human coaching to help both equity fund managers and allocators identify investment skill and bias — and capture performance that was previously being lost to decision-making deficiencies.
To participate in the Benchmark ranking/awards or use the methodology for manager assessment, click here to get started with the Behavioral Alpha Benchmark app.
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