Measuring Skill, Not Past Performance
Performance is not a measure of investment skill — it’s a measure of outcome. And while performance is a function of skill, it’s also a function of luck. Investors should be paying for skill — not luck — but how do we distinguish between the two?
Essentia’s Behavioral Alpha® Benchmark methodology looks beyond historical returns — and the effects of luck — to measure a portfolio manager’s demonstrated skill across a range of investment decision types.
April 11, 2024: Essentia study finds statistically significant link between Behavioral Alpha Benchmark scoring and future investment returns. Read more
These Essentia Behavioral Alpha Frontier (EBAF) diagrams are skills-based assessment and comparison tools. They depict the value added or destroyed by a given decision type for each participating portfolio manager. Magenta dots represent the top five managers in the overall assessment.
Each quarter, Essentia publishes the results of our Behavioral Alpha Benchmark assessment, which uses our peer-reviewed methodology to measure portfolio manager skill over the previous 36 months in seven key decision types: stock picking, entry timing, sizing, scaling in, size adjusting, scaling out and exit timing.
The most recent assessment examined 89 active equity mutual fund portfolio managers from October 1, 2021 through September 30, 2024. The five managers with the highest aggregate scores across all decision types are recognized as top performers in the Q3 2024 Behavioral Alpha Benchmark ranking.
Behavioral Alpha® Benchmark Ranking
Congratulations to the top performers in our Behavioral Alpha Benchmark ranking.
The top five managers in the current assessment (three years ended September 30, 2024) are:
#1
ARGA Investment Management – Emerging Markets Value Fund
#2
Harbor/EARNEST Partners – Small Cap Value Fund
#3
Brown Advisory – Small-Cap Fundamental Value Fund
#4
Hotchkis & Wiley – Small Cap Value Fund
#5
Franklin Templeton – Franklin India Fund
Who Uses the Behavioral Alpha® Benchmark
Active Equity/ETF Portfolio Managers &
Research Analysts
Use the Benchmark to compare their decision-making skills to peers and continuously improve performance.
Chief Investment Officers &
Investment Oversight Teams
Use the Benchmark to understand, evaluate and track the skills of each investment team member.
Asset Allocators &
Fund Buyers
Use the Benchmark to ensure they understand the strengths and weaknesses of the managers with whom they invest — and that they’re selecting the best, most-skilled managers for their capital.
The Benchmark assessment is available to users of Insight for Portfolio Managers and Insight for Allocators. To get started, please contact us. You can also initiate the process of adding a portfolio through the Behavioral Alpha Benchmark app.
The Behavioral Alpha Benchmark is a core component of all Essentia Insight tiers. Please view our Insight for Portfolio Managers pricing if you’re a manager. If you’re an allocator of capital, please view our Insight for Allocators pricing.
The Behavioral Alpha Benchmark assessment requires a minimum of three years of historical daily holdings data. Managers typically source the data from their custodian or fund administrator, or from their order management or portfolio management system. Essentia provides a data template and facilitates the process, coordinating with third parties as necessary. We have worked with most major vendors already.
Regardless of the source, Essentia’s data onboarding team has a tried-and-tested process for making the data upload process easy, and all data is handled with attention to privacy and under certified SOC 2 and ISO 27001 security standards.
Please view our Insight for Portfolio Managers and Insight for Allocators pages to learn more about how the Benchmark methodology is applied in Essentia’s services. You can also download our Behavioral Alpha Benchmark overview PDF or try the Behavioral Alpha Benchmark app today. If you’d like us to contact you to discuss this live, please let us know and we’ll follow up.
Download an overview of the Behavioral Alpha® Benchmark: