Welcome to Patrick O’Shaughnessy's podcast series, Invest Like the Best.
Joining me on the podcast this week is Jeff Ptak, head of global manager research at Morningstar. Jeff’s role puts him in the unique position to discuss the state of active management because he gets to see mutual funds from both the bottom-up, through deep diligence on investment strategies and firms, and top-down, using Morningstar’s data to assess industry-wide trends. Jeff is one of my favorite myth busters and discuss different variables for assessing active managers and mutual funds, but we also cover his favorite punk rock bands.
- X – Los Angeles/Wild Gift
- Ride – Nowhere
- (Referenced) My Bloody Valentine – Loveless
2:04 – (First Question) – What trends in the mutual fund and ETF space have Jeff’s attention today, which Jeff says is the shift towards lower cost, passive investments.
3:48 – Any particular places where we are seeing the most and least flight into passive management from active management and vice versa
5:28 – What catalysts could get people to flow back into active management
8:44 – What are the important things to look for when evaluating active managers
12:31 – Exploring active managers and the amount of money they keep in their own fund typically and how that goes into their evaluation
14:21 – Is there a preference in the type of firms that run funds
15:31 – How does tenure of the manager play into their evaluation
17:24 – Why winning funds can often look like losers
20:45 – Looking at the behavior gap, where the fund is acting in a manner that is more positive than the returns may indicate at the time
23:20 – What will Jeff tell their kids when it comes to investing their money in the future
26:41 – What are the qualitative aspects that Jeff thinks about when evaluating a fund manager
28:53 – How does Jeff weigh holding space and return space as factors when looking at a manage
31:55 – Does Morningstar look at the expense of actively managing a fund over the long term of an investment
32:34 – ActiveShare.info
33:27 – Looking at moats and how managers build them around their business to help them outperform in the future
36:59 – Building a moat around distribution
41:02 – The most interesting manager Jeff has researched – Primecap Management and why their incentive structure works so well
44:26 – What are active fees going to look like in the future?
49:37 – Why more transparency isn’t always better, (disclaimer: it is very important to Morningstar)
51:52 – Exploring behavior gaps and how they can be avoided
55:45 – Thoughts on the value-growth paradigm
57:49 – Jeff’s most memorable day throughout his career
59:57 – What was the kindest thing that Jeff has done for others and the kindest thing that was done for him.
1:02:37 – Two bands Jeff would encourage people to check out that are a bit under the radar
(Referenced) My Bloody Valentine – Loveless