The Best Investment Managers in the World
Do you know where to find the world’s best investment managers? If you ask most people that question, they’ll guess places like Wall Street in New York. Or London. Or any of the world’s great financial centers. But the real answer is Washington, D.C., where you will find the greatest concentration of the world’s best investment managers working inside the halls of the Capitol building. The most well-known among them are elected members of the House of Representatives and the Senate.
At least, that’s the only explanation that does not involve allegations of insider trading among the politicians and bureaucrats on Capitol Hill. We know that is the case because 2022 was a very bad year for the world’s professional investment managers. The Wall Street Journal describes how bad it was for them:
Well at least it wasn’t as dreadful as the Great Depression. Or even the financial crisis of 2008.
But for any mutual-fund manager trying to cope with the sea of red ink that flooded financial markets in 2022, that’s meager consolation. In a year when soaring interest rates and sky-high inflation left the S&P 500 index with a 19% loss and triggered an even worse year for the bond market, an estimated $8.2 trillion of stock-market wealth in the U.S. simply evaporated.
Even most of those value-and income-focused mutual-fund managers who “outperformed” the broad index did so by confining their losses to the single digits—little comfort for investors.
Indeed, of the 1,410 actively managed mutual funds that met the criteria for inclusion in the Winners’ Circle, The Wall Street Journal’s quarterly survey of top-performing stock managers on a 12-month basis, a mere 40 wrapped up 2022 in positive territory. The average loss for the whole group, according to data provided by Morningstar Direct, was 18.2%.
In other words, fewer than 3% of the professional investment managers who direct the world’s top investment funds managed to make a profit in 2022. Now compare that with how well the investment portfolios of just the elected members of Congress did:
More than two dozen members of Congress beat the stock market despite Wall Street suffering its worst year since 2008, according to an analysis by a popular stock-trading news site.
But there was one notable loser last year: Nancy Pelosi. The outgoing House Speaker’s portfolio dropped 19.8% in 2022—worse than the 18.2% decline in the ETF that tracks the S&P 500, according to the 100-page report by Unusual Whales....
The Unusual Whales report relied on financial disclosure forms filed by 131—or 24%—of the 535 members of Congress who reported trading activity in 2022. The members of the House and Senate traded up to $788 million in volume this year, a dip from the roughly $918 in 2021, the data show.
Of the 131 members of Congress that reported their trading activity, 26 beat the S&P 500 index in 2022. 23 of those achieved a positive return on their stock market investments.
That’s nearly 18% of the reporting members of Congress who made a profit by buying and selling stocks in 2022 versus 3% of professional investment managers.
When you consider most professional investment managers fail to surpass major stock market indices in good years, having such a large percentage of members of Congress beat the market stands out, especially during such a bad year for the stock market.
Either these members of the U.S. Congress are the best investment managers in the world, or something else very fishy is going on. Which scenario do you think is closer to the truth?