a lot of asset management firms missed out on Enron's

a lot of asset management firms missed out on Enron's
by irishrock (2018-12-11 08:13:56)

In reply to: If doing nothing routinely does as well as doing something posted by 88_92WSND

carnage

what's interesting about portfolio management and passive investing is that it isn't always what you own that can hurt you (vis a vis the index) it's what you don't own.

I remember sitting through a PM's presentation where Enron surfaced. The look on his face was horrific and sad. He starts muttering, "Enron was the worst part about my career. I was vindicated but the 18 months where it was running hot while I couldn't figure out why was horrible. My boss literally came into my office weekly and asked why I didn't own it."

I know there are many "index hugger" managers who may "hate JNJ, but I own it". If JNJ is, let's say 2.5% of the index, they may dislike the stock but allocate 1.5% of the fund to JNJ just because they are so benchmark aware.

I believe 18 analysts covered Enron and only one of them

smelled a rat. He was ridiculed by Enron management whenever he asked tough questions.

He never felt like gloating because he knew how many people had been burned.