How do you Predict Future Outperformance?

Using data provided by a manager's custodian, record keeper or from managers themselves, Inalytics looks at every position and trade, every day, going back varying numbers years depending on locale. With this data, Inalytics can see whether a manager has gotten into or out of stock positions at the optimum time and predicts their "hit rate" for being in or out of a stock at the right time. "The investment process is not relevant as an arbiter of success," says Di Mascio. It's "even simpler: either the stocks outperform or underperform; [you] want what you own to do well, and what you don't [own] to do poorly." A manager can "outperform the benchmark by not picking the losers as well as picking the winners." And of course if a stock is excluded on a given day and outperforms, "then there's missed opportunity." The idea is so simple but until relatively recently there wasn't enough available computing firepower to crunch the intraday data for all stocks against the manager's purchases and sales every day that Inalytics uses to evaluate an individual manager's "hit rates."