A precise and tight investment mandate is the bedrock of performance measurement. Evaluating managers without properly accounting for their mandate is like scouting athletes without knowing for what sport. A deep understanding of how investment mandates impact performance allows allocators to quantify the true value added by active managers.

Allocators must take care not to mistake descriptive analysis for prediction. Just because something involves numbers and metrics does not make it “Moneyball for investors.” Common attribution-style analysis is silent on the degree to which past outcome was achieved by skill or luck, and whether it will persist in the future.

An allocator invests in a manager with three straight years of positive alpha, and then it suddenly disappears. Perhaps this has happened more often than some care to remember. If alpha were a measure of skill, then we are in the midst of an everlasting pandemic of once-skilled managers losing their touch overnight. I don't think that's what's happening.