During the early 1950’s, one of the most popular cartoonists was Walt Kelly whose major character was Pogo. His characters were a reflection of human nature. He also ventured into politics and his most famous quotation, “We have met the enemy and he is us,” was a parody of Commander Perry’s message in 1813 after the Battle of Lake Erie. This phrase was Kelly’s response during that time period to the McCarthy Hearings but may also be appropriate in trying to answer the question as to why studies of mutual funds and investment management firms have demonstrated that over time periods of 10 years or more, most managers underperform the stock market indexes. Given that our profession has very talented, highly educated and motivated professionals, why is this a fact? It is “us”. Our thoughts on this subject are not to present any air of superiority or arrogance, but are based on years of experience and in analyzing our own mistakes. Accordingly, we have incorporated many reasons for underperformance into our investment philosophy, decision making and disciplines in order to improve our odds for success. Continue reading →