Our bottom line result is that perfect foresight has great returns, but gut-wrenching drawdowns. In other words, an active manager who was clairvoyant, and knew ahead of time exactly which stocks were going to be long-term winners and long-term losers, would likely get fired many times over if they were managing other people’s money.
Question: if God is omnipotent, could he create a hedge fund that was so good that he could never get fired? No. It turns out even God would most likely get fired as an active investor.