The four horsemen of apocalyptic position sizing
"Only listen to advice from people you want to look like."
– Gilbert Bernut, father, superhero, unsung 20th-century philosopher
Whilst at Fidelity, I used to run my algorithm across other managers' portfolios. My unbridled ambition was to help my colleagues improve their performance by a whopping 0.01% at a time. Whilst it does not look like much, 1 basis point even on every other trade compounded over a year would be enough to lift a ranking from the second quartile to the rarefied atmosphere of top-decile performers.
It soon dawned upon me that the same stocks kept popping up across all portfolios. Put smart, passionate people together in a collegial atmosphere, and healthy cross-pollination naturally ensues.
What was more intriguing was the disparity in performance despite the low dispersion in holdings. One would expect similar holdings to generate similar performance. There were...
