Research has found that high-potential active funds have three distinctive characteristics that mark them as different from run-of-the-mill active funds:
- They have concentrated portfolios that differentiates them from the market;
- They patiently hold their positions for lengthy periods; and
- They are disciplined and have the right structure to hold their positions through drawdowns.
In this paper, we look closely at each of the three factors and the deep academic research upon which they are based. We are particularly interested in the implications of combining these three factors into a single fund. Evidence supports the increased likelihood of the fund delivering extraordinary performance and wealth creation.
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