Market Deficiencies Are Self-Correcting

Fund managers must seek out market inefficiencies.

This idea originates from the late economist Paul Samuelson. His original point was that markets are prone to errors, which creates pricing distortions—and thus arbitrage opportunities.

The second point is that no matter what inefficiency you uncover, it will eventually be corrected.

In other words, every strategy has a cycle and will eventually stop working.

And depending on the broader historical regime, the difficulty of spotting those inefficiencies—and the frequency with which they appear—will vary.