Our 36-month analysis finds strength in small caps, declining hit rates, and a new leader in our ranking.
Today we announce the results of our fourth-quarter 2024 Behavioral Alpha® Benchmark (EBAB) ranking, which recognizes active equity mutual fund 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.
The most recent 36-month assessment concluded on December 31, 2024 and measured the demonstrated decision-making skill of 81 active equity mutual fund and investment trust portfolio managers, using the Behavioral Alpha Score.
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.
This quarter’s EBAB ranking highlights continued dominance by small-cap value managers, a general decline in hit rates, and the emergence of a new #1-ranked manager, Silvercrest International Small Cap Value. As always, the ranking focuses on decision-making skill, rather than past returns, offering a unique insight into how managers are navigating market dynamics.
| Rank | Manager(s) | Portfolio (Benchmark) |
| 1 | Robert Choi Al Chan Chris Richey Kevin Hill Ron Dornau |
Silvercrest International Small Cap Value Fund |
| 2 | Sukumar Rajah |
Franklin India Fund |
| 3 | Paul Viera |
Harbor Capital Advisors/EARNEST Partners – Small Cap Value Fund |
| 4 | Jim Miles David Green |
Hotchkis & Wiley Small-Cap Value Fun |
| 5 | Rakesh Bordia Caroline Cai Allison Fisch John P. Goetz |
Pzena International Value Fun |
Highlights of the Q4 2024 36-month assessment:
- Silvercrest debuts at #1. Silvercrest International Small Cap Value, a new entrant to the ranking, secured the top position with an impressive BA Score of 72.6.
- Small-cap value managers continue to dominate. Three of the top five managers specialize in small-cap value strategies, reinforcing a trend we have observed in previous rankings.
- We have seen a decline in each of the past four quarters in median Behavioral Alpha scores among the funds in our ranking – from 51.4 in the first quarter to 48.7 in the fourth. Underpinning this was a statistically-significant decline in hit rates within the key skill metric of Stock Picking – from 44.5% in Q1 to 41.1% in Q4. We are actively studying the drivers behind this weakening trend. One potential factor is the increased concentration within benchmark indexes, which has been impacting the relative performance metrics of active managers. Further analysis is ongoing, and our findings will be shared as they emerge.
- We see consistency among top performers. Historical data from previous EBAB rankings, including our October 2023 analysis, confirms that investment decision-making skill tends to persist over time. Four of this quarter’s top managers have made the list at least once before; three of them were among the Top 5 last quarter.
These results are publicly available through Essentia Insight’s Behavioral Alpha Benchmark app, which provides access to all 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.
How the BA Score is Calculated
The Behavioral Alpha Score (BA Score) is determined using a systematic approach that evaluates investment decision-making skill over a 36-month period. The methodology isolates skill from market conditions by analyzing managers’ hit rates (the percentage of value-added decisions) and payoff ratios (the relative impact of good versus bad decisions).
Each manager’s score is benchmark-adjusted and calculated based on seven key decision types:
- Stock selection – Did the manager choose stocks that outperformed relative to their benchmark?
- Entry timing – Did the manager initiate positions at advantageous times?
- Sizing – Were position sizes optimally determined based on expected return and risk?
- Scaling in – Did the manager build up positions effectively over time?
- Size adjusting – Did the manager make beneficial mid-position adjustments?
- Scaling out – Were reductions in position size executed effectively?
- Exit timing – Did the manager close positions at an optimal time?
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 (all based on 36-month timeframes):
| Median BA Score | Percent of portfolios adding value |
Percent of portfolios with a hit rate over 50% |
Percent of portfolios with a payoff over 100% |
|
| Ending 2024-Q4 | 48.7 | 43.0% | 31.7% | 55.7% |
| Ending 2024-Q3 | 49.3 | 48.3% | 22.5% | 57.3% |
| Ending 2024-Q2 | 50.3 | 55.7% | 21.6% | 63.6% |
| Ending 2024-Q1 | 51.4 | 56.9% | 25.0% | 65.3% |
| Ending 2023-Q4 | 50.3 | 52.5% | 30.8% | 62.5% |
| Ending 2023-Q3 | 50.6 | 53.3% | 24.4% | 67.8% |
| Ending 2023-Q2 | 50.9 | 56.5% | 28.2% | 71.8% |
| Ending 2023-Q1 | 51.6 | 63.6% | 28.4% | 79.5% |
| Ending 2022-Q4 | NA | 46.7% | 23.3% | 63.3% |
| Ending 2022-Q1 | NA | 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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