FAQ: Tampa Police and Fire’s Stock-Picking Approach vs. Diversified Investment Strategies

What is the main finding of MPI’s analysis on Tampa Fire and Police Pension Fund?

MPI found that the fund’s returns, achieved through a stock-picking approach, could be replicated with a more diversified and less risky investment strategy.

Why is the Tampa Fire and Police Pension Fund considered an outlier?

It uses a single manager and relies heavily on selecting single stocks, unlike most pensions and endowments that follow a diversified approach based on Modern Portfolio Theory.

How did MPI conduct its analysis?

MPI used its Stylus Pro software to perform a returns-based analysis, creating a long-only portfolio of market indices that mimics the fund’s returns.

What does MPI’s analysis suggest about stock-picking in large portfolios?

It suggests that stock-picking offers little true alpha in managing large, liquid portfolios and that similar returns can be achieved through diversified strategies.

Who is Michael Markov and what is his view on the findings?

Michael Markov is the Founder and CEO of MPI, who believes the findings validate Modern Portfolio Theory, showing diversification works over stock-picking for large portfolios.

What are the implications of MPI’s findings for institutional money managers?

Managers might achieve similar returns with less risk by focusing on diversified strategies like ETFs, rather than individual stock picks.

How does the risk of Bowen’s approach compare to other pensions?

Bowen’s approach presents moderately higher risk than other pensions, but only slightly more than other equity-heavy public pensions.

Where can I find the full report of MPI’s analysis?

The full report can be found on MPI’s website at the provided link in the content.

Who should I contact for more information on MPI’s research or Stylus Pro software?

For more information, contact MPI at +1 (908) 608-1558 or [email protected].