Practical Applications of The Myth of the Monkey

Abstract

The belief that professional asset managers are no more accurate than monkeys and add no economic value has gained popularity in recent years. Robert Snigaroff, President and Chief Investment Officer at Denali Advisors, argues that the belief stems from the fact that firms are evaluated on the excess returns they produce.

“The financial press has been snookered into writing goofy articles comparing investment advisors to monkeys, and conceptually it doesn’t make much sense,” Snigaroff contends.

This bias led Snigaroff to examine the economic benefits of asset management in The Myth of the Monkey , which was published in the Fall 2012 issue of The Journal of Portfolio Management .

In this Practical Applications report, we outline the author’s thought experiment, which proves that indeed asset managers provide material benefits to an economy—namely, liquidity and information. He gives advise to asset managers on how to frame the discussion with their clients.