That is what I thought when I watched the youtube clip (https://www.youtube.com/watch?v=r5QsIT0KjkU) of Giovanni de Francisci talking about hedge fund managers.
What he said is also just as correct for simple independent asset managers. I have just come through an education programme to become a Certified International Investment Analyst (CIIA) and the amount of modern portfolio theory (MPT) and diversification talk can make people blind to the most interesting investments. Or as Giovanni de Francisi put it in the clip linked above: A hedge fund manager he speaks to has to diversify to satisfy the clients rules so much, that he gives up close to 1/3 of the performance he achives when focussing on his favorite ideas for himself (he can bear the risk). So the hedge fund manager had to hold more positions, just to please many clients who have been indoctrinated by MPT and would not be allowed to invest.
Giovanni de Francisi also tells a great example about a hedge fund manger and his tactic regarding condos in Florida in the aftermath of the subprime crisis (towards the end of the video). Limited downside and over 100% profit opportunity.
Now of course he was talking about his favorite stories. It is therefor more anectodal than scientific. It would be interesting to see how many times he really does get better performance from his selection of fund mangers.
But in my experience the best investments have always been ones that knowledgable private investors would react to the most negative. Talk to someone about russian bonds during the most active part of the Ukraine war. Talk to someone about a condo in Florida in 2009. Psychology of the masses makes the best investments the hardest to stomach. Here’s a great graph Jack Schwager talks about in his book “Market Sense & Nonsense”.