It’s conventional practice that when you’re looking to hire an investment manager, you consider the manager’s three-year relative return as a gauge of future performance. Yet in the research that I’ve done with colleagues into how to select a money manager, we found that a three-year positive return actually has a negative correlation to return in the next three years. In other words, the best time to hire a disciplined manager might be when their style of investing is out of favor—not right after they’ve have a good run. The market is cyclical, and so too is investment style. Consider value investing. This has been a very successful approach, but there are some years when it doesn’t work. This suggests that when you see a strong three-year performance by an individual money manager, what you’re really seeing might be a synergy of investment style and market conditions. It may well be that there is a cyclicality to investment manager returns, just like there is to asset class returns.