Why fund managers from poorer families outshine richer peers
This is one of those dangerous bits of research that reinforces all your prior assumptions. But with wave three surging, we all deserve a pick-me-up from knowing we were right all along.
Loads of research shows it’s easier to get on in life if you come from a rich family. You often get a better education, contacts and a sense that career success is the norm for you. Those born with fewer advantages have to rely on talent and effort instead.
It should follow that those making it into elite jobs from poorer backgrounds are, on average, better performers than their peers: they’ve had to rise to the top against the odds.
It turns out this isn’t just a lazy stereotype, at least in the asset management business. New research examines the success of fund managers, who oversee investment portfolios where financial returns can be easily compared and measured. The wealthiest fifth of managers (in terms of wealth they were born into) underperform those from poorer families by up to almost 1.4% a year.
Why might that happen? While managers with strong performances are more likely to be promoted, that link is weaker for managers born into wealthy families. Their poorer peers seem to make more effort as well as having more ability.
If you are wealthy yourself, the conclusion is clear: choose your fund manager carefully. For society, there are some rather wider lessons…
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org