Does fund manager tenure matter?

What type of fund manager do you like? --Long-tenure or short-tenure fund manager?

First, let's specify the definition of "long-tenure" and "short-tenure". We use a range of zero to three years to define "short tenure", and six years and greater to define the "long tenure".

On a pretax basis, the average long-tenure manager underperforms the average short-tenure manager by 0.03 percentage point a year.

For posttax returns, long-tenure managers outperform short-tenure managers by 0.14 percentage point a year, on average.

Why does this reversal happen? The answer is that short-tenure managers are trading much more often than long-tenure managers. For investors, more trading means a much larger tax bill at the end of the day.