Managers are not good timers - more evidence

There are two ways to add value as a multi-asset class mutual fund, the traditional alpha of picking investments and beta timing through asset class allocation changes. A beta timing choice, for example, is picking whether to hold stocks over bonds. An alpha choice is picking the right stocks. The quality of  a manager is based on his skill characteristics. Some can be classified with the first type, beta choices, as showing characteristic timing while alpha generation will show-up as characteristic selectivity.

Timing skills are hard to measure. In a perfect world, having position information is important, but not always available. There is the strategic choice of assets and also the tactical changes in these allocations. The timing skill is the ability to re-weight asset classes against the strategic allocation. Some argue that measures of trading skill are based downward if changes are made between measurement observations. If you trade tactically inside of a month and skill is measured monthly, the value of timing may be lower than reality. Similarly, other will say skill is biased upward because long-term strategies like the use of options can add value but is not truly related to timing skill. 

There is much room for discussion in this area, but the latest work suggests that timing skill does not exist for most multi-asset class mutual funds. The paper "Multi-asset class mutual funds: Can they time the market? Evidence from the US, UK and Canada" looks at timing skills through a number of approaches to measurement and finds that skill is rare. It may exist, but not with most and not with mutual funds. It does not matter what part of the world. Timing of asset allocations is hard.