When making decision about anybody or anything, it just makes sense to look at past performance - for example, when choosing a builder, one might seek references from previous clients. When it comes to choosing between investment managers, intuition suggests that past performance would provide valuable insights into a manager’s skill. But, past performance reflects three things - the skill of the manager, the risks the manager takes (as we are told that higher returns come with taking higher risk) and just plain luck. Hence, when trying to guage a manager’s in...