The correlation between a fund manager’s physical attractiveness and their investment performance has sparked intrigue. Recent academic research by two Chinese scholars suggests that “funds with facially unattractive managers outperform funds with attractive managers by over 2% per annum.” Additionally, they argue that despite generally inferior performance, “good-looking managers attract significantly higher fund flow, especially when their funds are available on Fintech platforms, making their photos accessible to investors.”
The chart below illustrates the cumulative outperformance of the least attractive quintile of fund managers compared to the most attractive quintile over the 2005-2020 period
Source: Bai, Chengyu and Tian, Shiwen, What Beauty Brings? Managers’ Attractiveness and Fund Performance (October 9, 2023)
Any research such as this needs to be treated with scepticism, aware of the risks of data snooping and over fitting. For example, notice that in the equal weighted case above, the phenomenon has actually not been present since 2011. So I would take this result with a good pinch of salt. But there is a casual mechanism that could be at play.
In the book ‘Skin in the game’, the former derivatives trader turned author Nassim Taleb states that ‘Surgeons Should Not Look Like Surgeons’. He argues that if choosing between two surgeons he would actively seek the one that doesn’t look the part.
“Why? Simply the one who doesn’t look the part, conditional of having made a (sort of) successful career in his profession, had to have much to overcome in terms of perception. And if we are lucky enough to have people who do not look the part, it is thanks to the presence of some skin in the game, the contact with reality that filters out incompetence, as reality is blind to looks.”
Whether it be fund managers, management teams or surgeons often seeking out those who don’t look or sound the part but have achieved success in an objective and technical field is often a profitable decision.
o while I wouldn’t advise following the research above and allocating to the least attractive fund manager possible (despite the potential asset raising advantage that may gain me) the broader principle is a valuable one.
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