Norbert, I am glad you found the data interesting. While it can be argued from a purely statistical standpoint that full market cycles are most useful for analysis, practicality means that shorter periods are actually required. First, full market cycles typically take more than a decade to play out. While academically interesting, most investors have an investment decision horizon for active managers that runs 1-2 years. Also, if active managers underperform in rising markets (such as -150bp per year) and then add relative value in bear markets (such as +250bp per year), from a mathematical basis the client still loses.

We have looked at market timing events, and that research is being discussed for future publication. But we can state that on a risk-adjusted basis out of benchmark market timing bets in the sample set we evaluated had no statistical significance.

Finally, we use rolling one-year periods as a means of accessing a stable performance profile for the active managers.

Alexey