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Technology Stocks : SAP A.G.
SAP 251.75-0.1%Nov 10 3:59 PM EST
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To: MulhollandDrive who wrote (2497)9/9/1998 2:13:00 PM
From: mauser96  Read Replies (1) of 3424
 
OTOT BP,I see no real reason why institutional investors would change. It's a risk - reward thing. Most of the mutual fund managers make huge salaries,far more than most of them could make doing anything else. At an early stage in their career when they are handling smaller sums , some will take bigger chances. Even by pure luck half will do better than the averages, and at this stage one or two clever investments can alter their return.(Even the smartest of us only gets a few great ideas each year.) By the time they are handling large sums,they are judged on a relative comparison to the S&P500. A slight under or over performance won't cost them their fat salaries, but if they gamble and win big the most they will get is a raise. If they gamble and loose big, they will be out of a job. The key here is that they are judged by relative performance, not absolute performance. If your peers lose 40% and you lose only 38% your job is safe. Therefore you mostly invest in what everybody else is investing in.
For all practical purposes big money managers can't invest in small cap stocks because their buying and selling results in drastic price changes, and because even if they are right, the profit as a percent of their total assets is too small. While we would be delighted with a $1 million profit, it's too small for a big fund manager to spend any time on.
good investing
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