It has been said, and backed up by research, that it is impossible to find a manager who would 1) outperform the benchmarks in the long run, possibly not "consistently", 2) Will not take on unwarranted risk and recognize market follies enough to not participate in them.
I would like to suspend this belief in such an impossibility. Let's assume, even if this is not true, that there are such managers and then can be identified.
Under this lofty assumption, how would one go about finding such a manager? What sorts of people would you look for, where, how would you eliminate those that look like they could do (1) but lose everything due to failing on (2)?
Essentially, the dilemma of a little investor, like myself, is that a good manager may be better than me at managing money, but there is almost inevitably an agency problem (conflict of interest) of one sort or another. This complicates search for a "great manager". Plus, some would not take small amounts of money.
I would like to ask, if possible, to not argue whether a manager like this can be found. I wanted this thread to discuss how to find one, not whether it is possible.
My own feeling about the question posed, is that it is very difficult to find a good manager that would satisfy both conditions and would work under an acceptable reward structure (and would take a relatively small amount to manage).
It may be easier to identify certain red flags to be avoided, such as
1) investments in anything exotic taking up a large part of a portfolio, 2) excessive self promotion, 3) too much secrecy, 4) abuse of leverage. i