  The M6 Competition assessed the performance of competitors using a ranked
probability score and an information ratio (IR). While these metrics do well at
picking the winners in the competition, crucial questions remain for investors
with longer-term incentives. To address these questions, we compare the
competitors' performance to a number of conventional (long-only) and
alternative indices using standard industry metrics. We apply factor models to
the competitors' returns and show the difficulty for any competitor to
demonstrate a statistically significant value-add above industry-standard
benchmarks within the short timeframe of the competition. We also uncover that
most competitors generated lower risk-adjusted returns and lower maximum
drawdowns than randomly selected portfolios, and that most competitors could
not generate significant out-performance in raw returns. We further introduce
two new strategies by picking the competitors with the best (Superstars) and
worst (Superlosers) recent performance and show that it is challenging to
identify skill amongst investment managers. Overall, our findings highlight the
difference in incentives for competitors over professional investors, where the
upside of winning the competition dwarfs the potential downside of not winning
to maximize fees over an extended period of time.
