Larry Kochard – Endowment Professor (Capital Allocators, EP.11)

Evaluating Managers

Evaluating investment managers involves a meticulous process akin to historical research. Larry Kochard emphasizes the importance of reference checks to discern the true character and capabilities of managers, much like a historian piecing together a biography 1. He notes that understanding a manager's ethics and intelligence is crucial, and this requires extensive legwork. Additionally, Ted Seides and Larry discuss the challenges of assessing a manager's performance, especially when external factors may obscure true capability 2.

   

Volatility Management

Managing volatility in investment performance is a nuanced task. Larry explains that while volatility is expected with concentrated managers, the real concern is whether it threatens the manager's business 3. He highlights the importance of assessing how managers react to extreme success or failure, as these can alter their risk management approach. Furthermore, Larry discusses the difficulty of evaluating performance over short periods, advocating for a long-term perspective to truly understand risk and performance 4.