Podcast Summary

New Books Network – Interview with Joe Wiggins, Author of The Intelligent Fund Investor: Practical Steps for Better Results in Active and Passive Funds

Host: John Emmerich
Guest: Joe Wiggins
Date: October 16, 2025

Episode Overview

In this episode, John Emmerich interviews Joe Wiggins about his book The Intelligent Fund Investor, a practical guide aimed at helping investors make better decisions when navigating the complex landscape of active and passive funds. Wiggins, an experienced asset manager with a grounding in behavioral science, shares his insights on fund selection, manager analysis, the tension between active and passive strategies, and the behaviors that often undermine investor success.

Wiggins' core message is that fund investing is as much about understanding human behavior—our own as fund selectors and the fund managers’—as it is about financial theory and numbers. The conversation explores actionable ways to filter the overwhelming universe of funds, avoid behavioral pitfalls, and align long-term investment practices with better outcomes.

Key Discussion Points & Insights

Joe Wiggins’ Background and Behavioral Focus

• Behavioral roots: Wiggins began with a background in sociology and behavioral science, applying these to asset management and fund analysis.

  "The lens and the angle I've always had on fund investing and asset management is how do people behave? What types of decisions are people making, and why are they making them?" – Joe Wiggins [01:36]

The Fund Selection Challenge: Navigating Overchoice

• Overwhelming options: The number of funds far exceeds the number of stocks in many markets, making the initial screening process critical.

  "We've got thousands of funds, new funds launching all the time... and we tend to focus on the wrong criteria. So we look almost primarily at past performance... which is entirely the wrong way to think about it." – Joe Wiggins [04:01]

• Mean reversion: High past performance often signals likely future underperformance due to mean reversion, contrasting fund investing with how we'd approach product reviews elsewhere (e.g., Airbnb).
• Acts of avoidance:
  • Thematic funds: Avoid trendy, story-driven funds (robotics, marijuana, etc.), which usually launch after sector outperformance, meaning upside is priced in.

    "These types of funds are brought to market after the areas in which they're investing has already produced stratospheric returns... so you end up losing money." – Joe Wiggins [05:28]

  • Star managers: Be wary of widely-publicized, media-friendly managers managing too much money, which can dilute their performance and lead to hubris-driven mistakes.

    "When managers have become that rich, that successful, that powerful, hubris often takes hold..." – Joe Wiggins [07:08]

Active vs. Passive Fund Allocation

• Behavioral suitability: Not everyone should own active funds. Only consider them if you can endure substantial periods of underperformance.

  "Are you willing to go through fairly long periods of underperformance? Because that will happen with all active funds..." – Joe Wiggins [09:52]

• Starting point: A 50/50 split between passive and active may make sense, but the optimal allocation shifts with market structure and valuations.
• Market structure matters:
  • Large-cap dominance (e.g., S&P 500) benefits cap-weighted passive funds; periods of small/midcap outperformance can favor active or alternative strategies.
  • International differences: UK experience contrasted with the US—UK's big “old economy” stocks underperformed, making it easier for active managers favoring smaller companies to excel.

    "It's just a structural feature of markets... So you should definitely look at the structure of the market before you invest in it..." – Joe Wiggins [15:33]

Screening and Selecting Active Managers

Three-Part Framework:

1. Beliefs: Understand what inefficiency the manager seeks to exploit and whether their edge is credible and specific.
   • Example of vagueness to avoid: “Growth at a reasonable price” is not a meaningful belief.
2. Process: Assess how the manager makes decisions and whether their process consistently exploits the stated inefficiency (ideally confirmed by a hit rate better than 50%).
3. Outcomes: Judge whether the results are consistent with the beliefs and process, not just good recent performance.

   "What you want to understand in outcomes is...given the beliefs and the process, are the outcomes of the strategy consistent with that?" – Joe Wiggins [19:49]

• Avoid chasing performance: Don't use past returns as a primary selection criterion.
• Screen for consistency: Managers should show repeat behavior aligned with their philosophy, not just changing styles to fit market trends.

Concentrated vs. Diversified Funds

• Risk of concentration: A concentrated fund broadens the range of outcomes—potential for outperformance, but also for severe missteps if something goes wrong.

  "When we're very concentrated, we are quite significantly and sharply exposing ourselves to that risk... if you're very concentrated, one thing has to happen, one event... could savage your entire investment case..." – Joe Wiggins [25:53]

• Smart diversification: You can construct a diversified portfolio by blending several concentrated funds with distinct styles, but beware of “diworsification” (many funds but only one style).

Avoiding Complexity & Understanding What You Own

• Complexity as danger: Anything involving leverage, derivatives, or opaque (quant) processes creates risks most retail investors cannot evaluate.
• Absolute return / “hedge fund lite” products are difficult for non-experts to analyze.

  "If you can't do [explain it], then you shouldn't be investing in it... There is no need to invest in things that you don't understand." – Joe Wiggins [30:48]

Selling Discipline: When to Walk Away from a Fund

• Clear upfront expectations: Pre-commit to reasons for selling—preferably documented outside the emotional heat of market moves.
• Monitor for “style drift”: When a manager veers from their stated philosophy (e.g., suddenly overweighting a sector contrary to their strategy), selling may be warranted.

  "That is a type of style drift. When the behavior deviates from you, from reasonable expectations. That's the key one for me." – Joe Wiggins [33:56]

• Other triggers: Team changes, asset bloat (strategy is less effective at larger sizes), or unraveling of prior advantages.

Volatility, Performance Smoothing, and Time Horizon

• Danger of short-term focus: Managers trying to smooth volatility via short-term trades often destroy long-term returns.

  "As soon as you collapse your time horizons, it's just market noise. You can't predict it, you can't control it..." – Joe Wiggins [39:08]

• Performance reporting: Industry’s obsession with quarterly numbers fosters bad behaviors and myopic management.
• Private equity and “volatility laundering”: Apparent low volatility in private assets is often just a function of how they're marked, not real diversification.
• Behavioral upside: The inability to trade or see daily marks (as with private equity or forgotten pensions) can make investors better by removing decision points.

Behavioral Tricks and Practical Suggestions

• Add friction to good effect: Make it harder to act impulsively—don’t download portfolio apps, make passwords cumbersome, sleep on decisions, etc.

  "Every time you check [your portfolio], you create a decision point... You'll be being driven by emotion, by how you feel, by how much red you're seeing on your screen..." – Joe Wiggins [45:25]

• Build safeguards: Use pre-commitment strategies, account “locks,” or even redemption fees to discourage short-term panic selling.

The Problem of Industry Incentives

• Misaligned compensation: Most fund manager compensation is based on one- or three-year results, contrary to their claims of long-term focus.

  "You tell me one thing, you tell me your investment philosophy and then you tell me your incentives. What do I think drives your behavior? Or I know it's your incentives." – Joe Wiggins [56:09]

• Public asset managers face short-term pressure: Alignment is more often found in smaller, boutique, or employee-owned firms with long-term incentive structures.

Why Active Managers Underperform

• Fees are the biggest culprit: High fees erode returns and make long-term outperformance unlikely.

  "The overarching problem for active managers... is that the fees are too high. Fees compounded through time make it extraordinarily difficult for active managers to outperform." – Joe Wiggins [59:21]

• Short-termism & trend-chasing: Chasing the “hot” trends or fads delivers erratic results.
• Need for better alignment and incentives: Lower fees, improved alignment, and patience are essential for outperformance.

Notable Quotes & Memorable Moments

• On behavior and investment decisions:

  “Fund investing is just a unique behavioral challenge... there’s so much choice and so much noise. It’s really difficult, behaviorally, to do it well.” – Joe Wiggins [63:55]

• On friction and investing:

  “How can I add friction to this investment approach that I've got? By not checking your portfolio, by not having the app... add some friction to your decision making." – Joe Wiggins [47:45]

• On time as an investing factor:

  "Time is a factor. It’s the one that gets talked about the least. And in fact it makes the other factors work." – John Emmerich [51:58]

Timestamps for Key Segments

• [01:36] – Joe Wiggins’ background and behavioral science view
• [04:01] – The scope of the fund universe/Filtering techniques
• [09:52] – Active vs. Passive allocation and market structure
• [15:33] – Market structure (UK vs. US) and its impact
• [19:49] – Three key elements for selecting active managers
• [25:53] – Concentrated funds and associated risks
• [29:38] – Complexity in fund products and why to avoid it
• [33:56] – Criteria for selling a fund (style drift, asset bloat, etc.)
• [39:08] – Problems with performance smoothing and short-termism
• [45:25] – Behavioral tricks to improve investment outcomes
• [56:09] – Incentive structures and misalignment
• [59:21] – Why active managers underperform
• [63:55] – Book’s purpose and behavioral challenges in fund investing

Recommended Readings

• Behavioral Investing by James Montier – Joe’s foundational text [61:52]
• Thinking in Bets by Annie Duke – For probabilistic decision-making [61:52]

Final Thought

Wiggins’ book fills a niche between technical analysis and behavioral investing, addressing the neglected but crucial space of fund selection. His message: modest behavioral and process tweaks—not dramatic overhauls—can materially improve long-term outcomes.

“...If we can rethink those beliefs and behaviors, I think that people can have better outcomes. And that’s not with dramatic changes, but really subtle changes...” – Joe Wiggins [63:55]