The Confounding Bias For Investment Complexity

The Confounding Bias For Investment Complexity by Jason Hsu and John West, Research Affiliates The Confounding Bias For Investment Complexity Key Points A preference for complexity is almost hardwired into investors, their agents, and asset managers because the intuition is that a complicated investment landscape requires a complex solution; a complex strategy also supports a higher fee from both agents and managers. Research shows that simple, low-turnover and complex, high-turnover strategies perform similarly on a before-fee basis, suggesting the former may have the advantage after tax. Simplicity leads to better investor outcomes not because simplicity in and of itself produces…