The New Trust But Verify

Abstract

The old “Trust but Verify” was all about the accuracy of performance results reported by money managers. We even distrusted custodians, so consulting firms performed custodial audits. The pressure worked. Today we have performance reporting standards promulgated by the CFA Institute, enlightened custodians, and a raft of computer checks and balances. By contrast, the new “Trust but verify” is all about the spin. Professional sales people can turn mold into gold right before our eyes. The most accurate performance results are presented in the most favorable light, even when the money manager has failed.

Keywords: Attribution, Due diligence, Alpha

JEL Classification: G11,G23