What an amazing story. All the fund managers of Absurdistan beat the market. And they are the market.
That can’t be! Or can it? Where is the trick?
But let’s take it one step at a time:
Absurdistan is a completely isolated country. The same 57 companies have been listed on its stock exchange for over 10 years.
Only residents of Absurdistan are allowed to buy shares and only through equity funds.
For over 10 years, the same 7 equity funds have been available for selection. No fund was newly launched, merged or ceased to exist in the market.
Over the last 10 years, all 7 equity funds have outperformed the Absurdistan Total Return Equity Index. All of them, without exception.
How is this possible?
The 7 funds are the market. And they all beat the market?!
No, there are no tricks, no mirrors, nothing up my sleeve. The market index includes all dividends or any other flows. There are no further market players. There are no costs or taxes involved. The financial market law of Absurdistan meets international standards.
Incredible? At first glance, yes. But the solution is elegant and plausible – and, above all, of the highest practical relevance:
This phenomenon can be observed, in a diluted form of course, on the markets every day. It has an enormous impact on the behavior of investors, fund managers and their employers.
So how is it possible for all Absurdistan fund managers to beat the market when at the same time they represent the entire market?
And what lesson do we learn from this?
Do you know the solution – or do you have questions?
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