Uncertain markets outpace stock-pickers' talents or luck

NINE years ago, Randy Kurtz made an extraordinary bet on himself, the stock market and his ability to pick a few winners.

He hung out a shingle for his money management firm and made the following promise to investors: If his investments underperformed the Standard & Poor's 500-stock index, they would pay him nothing. But if he beat it, they would pay him a fee equal to one-third of the money they had made beyond what the index had returned.

This was not how things were typically done. Managers of mutual funds would take, say, 1 per cent of all of the assets each year whether they beat the market or not. Hedge fund managers might help themselves to 2 per cent of the entire pile of money to compensate them for their valuable time, in addition to 20 per cent of any winnings beyond a particular benchmark, like the S&P 500.