Portfolio Manager: Mutual Fund Industry is BROKEN

You know, I founded Rainwater Equity uh after serving as portfolio manager at TCW for many years and prior to that at Fidelity and I really founded the firm because I felt the mutual fund industry particularly on the equity side is just broken. 93% of funds uh underperform their benchmarks on most measurable periods 1 year, 3 year, 5year periods of time.

The industry is just doesn't work.

And I believe the reason the industry is broken is because portfolio managers take a flawed approach to to investing.

And that flawed approach is looking at uh every individual business in an index and trying to come to a conclusion as to the future prospects of that particular business by deploying dozens or hundreds of MBAs who are really smart to assess each business and then provide the portfolio manager uh with a recommendation as to how they should invest relative to those benchmark weights.

That approach doesn't work.

And the reason it doesn't work is I believe most companies can't be predicted.

And if you can't predict where a business will be in a year or two, then you certainly can't predict where it's going to be in 3 or 4 years.

And that makes it very very difficult to value and difficult to make a an appropriate appraisal