The funds these researchers are likely to have found will tend to be the big ones. Incentives when you have a few billion dollars under management are not what you think.
Your main issue once you reach that size is not losing the institutional investors. These tend to be pension fund type folks who have stringent due diligence requirements: lots of boxes that need to be ticked. This ends up meaning they actually don't have that many funds they can invest in, because inevitably all the filters will reduce the field. So what does that mean? It means generally they aren't going to change managers. The only thing that will really make them change is a blowup. The kind of thing where they have egg on their faces because they found this guy Madoff, did their homework, and it turned out to be a fraud. Or a big explosion that isn't a fraud, but wasn't what it said on the tin. That's the only time they'll ever change once they've gone through the pile of docs. (Oh, there's also when there's a new guy in the seat and he needs to do something. But that nets out.)
So what do you do as a manager? Just make sure you don't blow up. (I presume if you're running a fraud you have some strategy, too. But I'm not experienced with that!) How do you not blow up? Well, there's blowing up and there's blowing up with everyone else. Because as I mentioned, there's a limited portfolio of managers available. So just don't veer to far away from the pack, and you'll be mostly fine.
I would think by far most managers do not have systematic alpha. Either they aren't systematic, ie they trade discretionary and their pitch is to be good forecasters, or their system isn't doing anything other than well known tradeoffs (buy lower P/Es, higher cash flows, sector rotation, etc). Or they have a different risk taking mentality that makes them look better when times are good (skew trades).
There are a number of strategies out there that are real alpha though. Tough to find them, but let me give you an example. A friend explained he'd found a systematic way in which traded funds are mispriced. So, due to the intricacies of a little corner of the market, there was some predictability in how certain baskets are mispriced against their contents. He set up an infrastructure to exploit this (not HFT, paperwork), and makes a good living just doing that arb. There's load of similar little pockets to make money in.
Your main issue once you reach that size is not losing the institutional investors. These tend to be pension fund type folks who have stringent due diligence requirements: lots of boxes that need to be ticked. This ends up meaning they actually don't have that many funds they can invest in, because inevitably all the filters will reduce the field. So what does that mean? It means generally they aren't going to change managers. The only thing that will really make them change is a blowup. The kind of thing where they have egg on their faces because they found this guy Madoff, did their homework, and it turned out to be a fraud. Or a big explosion that isn't a fraud, but wasn't what it said on the tin. That's the only time they'll ever change once they've gone through the pile of docs. (Oh, there's also when there's a new guy in the seat and he needs to do something. But that nets out.)
So what do you do as a manager? Just make sure you don't blow up. (I presume if you're running a fraud you have some strategy, too. But I'm not experienced with that!) How do you not blow up? Well, there's blowing up and there's blowing up with everyone else. Because as I mentioned, there's a limited portfolio of managers available. So just don't veer to far away from the pack, and you'll be mostly fine.
I would think by far most managers do not have systematic alpha. Either they aren't systematic, ie they trade discretionary and their pitch is to be good forecasters, or their system isn't doing anything other than well known tradeoffs (buy lower P/Es, higher cash flows, sector rotation, etc). Or they have a different risk taking mentality that makes them look better when times are good (skew trades).
There are a number of strategies out there that are real alpha though. Tough to find them, but let me give you an example. A friend explained he'd found a systematic way in which traded funds are mispriced. So, due to the intricacies of a little corner of the market, there was some predictability in how certain baskets are mispriced against their contents. He set up an infrastructure to exploit this (not HFT, paperwork), and makes a good living just doing that arb. There's load of similar little pockets to make money in.