Among our largest-ever universe of portfolios, managers from Franklin Templeton and Invesco stand out in our three-year ranking.
Our latest (three years ended December 31, 2025) Essentia Behavioral Alpha Benchmark ranking shows a pronounced downturn in decision-making outcomes across the ranked universe. The median Behavioral Alpha Score for the 163 portfolio managers in our ranking — which measures the value added through decision-making, when compared with what would have been achieved by chance — fell to 47.7, down from 49.3 at 30 September 2025.
Most key metrics showed a decline. Decision hit rates continued to slip, with only 19.0% of managers adding value through half or more of their decisions. Payoff breadth narrowed as well: 50.3% of portfolios achieved payoff ratios above 100%, compared with 56.4% in Q3. Overall, just 39.3% of portfolios added value through their decision-making, down from 48.1% last quarter. As in recent quarters, we believe these results may reflect the difficulty active managers continue to face in a market dominated by concentrated index returns.Â
Against that backdrop, a small number of firms stood out for the quality of their decision-making. This quarter’s top-ranked portfolio — Invesco Value Opportunities Fund — achieved a Behavioral Alpha Score of 75.11, one of the highest in the history of the Benchmark, underscoring the dispersion in skill even as overall metrics declined.
About the Behavioral Alpha® Benchmark
The Essentia Behavioral Alpha Benchmark (EBAB) is the investment management industry’s only systematic assessment of decision-making skill. Unlike traditional rankings based on past returns, EBAB evaluates how portfolio managers make investment decisions over a 36-month period, isolating skill from luck and market movements.
Using proprietary decision attribution analytics, the ranking assesses managers across seven key decision types. A manager’s Behavioral Alpha Score (BA Score) is calculated based on their hit rate (percentage of decisions that add value) and payoff ratio (the magnitude of good vs. bad decisions).
The five highest-scoring managers, represented by the magenta dots, are those towards the upper-right on this frontier diagram — furthest away from 0,0.
A Behavioral Alpha Score above 50 indicates consistent value-additive decision-making. And recent research shows that managers with 3-year BA Scores over 50 are 1.5x as likely to outperform their own benchmarks over the subsequent 12 months as managers with BA Scores less than 50. Managers who have demonstrated good decision-making over the last 3 years have been more likely to go on to outperform.Â
It is possible for a manager who has been underperforming to have a BA Score over 50, implying that they are ‘undervalued’ by performance-based metrics. Likewise it is possible for a manager who has been outperforming to have a BA Score under 50 – in other words, to have got lucky. That has implications for fund managers and fund selectors alike. Essentia is carrying out further research in this area, so watch this space!
Top 5 Managers for the 3 Years to 31 December 2025
The most recent 36-month assessment concluded on December 31, 2025, evaluating the demonstrated decision-making skill of 133 active equity mutual fund and investment-trust portfolio managers using the Behavioral Alpha Score. The Top 5 managers are as follows:
| Rank | Manager(s) | Portfolio (Benchmark) |
| 1 | Jonathan Edwards Jonathan Mueller |
Invesco Value Opportunities Fund |
| 2 | Janakiraman Rengaraju Rajasa Kakulavarapu Sandeep Manam |
Franklin India Flexi Cap Fund |
| 3 | Jonathan Edwards Jonathan Mueller |
Invesco Small Cap Value Fund |
| 4 | Bassel Khatoun Salah Shamma |
Franklin MENA Fund |
| 5 | Sukumar Rajah | Franklin India Fund |
Key Takeaways and Notable Trends
- Invesco and Franklin Templeton stand out in a difficult period. Invesco placed two strategies in the Top 3, while Franklin Templeton once again had multiple portfolios in the Top 5, reflecting particularly strong decision-making results from those teams in a difficult quarter.
- Decision-making outcomes weakened broadly. The median Behavioral Alpha Score fell to 47.7, with fewer than 40% of portfolios adding value overall. Measures of hit rate and payoff both declined, marking the weakest quarter across several metrics in the three-year history of the Benchmark.
- Stock selection remained challenging. Concentrated market leadership continued to make it difficult for managers to add value through stock picking alone. Fewer managers achieved positive outcomes through selection, contributing to the broader decline in overall scores.
These results are publicly available through Essentia Insight’s Behavioral Alpha Benchmark app, which provides access to all mutual funds, active ETFs, and SMAs in the Benchmark database. With the Insight Pro tier, users can drill down on a portfolio’s Behavioral Alpha Score for deeper visibility into which decision types have been adding and destroying the most value.
How the BA Score is Calculated
The Behavioral Alpha Score (BA Score) is determined using a systematic approach that evaluates investment decision-making skill over a 36-month period. The methodology isolates skill from market conditions by analyzing managers’ hit rates (the percentage of value-added decisions) and payoff ratios (the relative impact of good versus bad decisions).
Each manager’s score is benchmark-adjusted and calculated based on seven key decision types:
- Stock selection – Did the manager choose stocks that outperformed the benchmark over the last 3 years?
- Entry timing – Did the manager add value through the precise timing of their entry?
- Sizing – Did the manager add value through capital allocation decisions, compared to running an equally-weighted portfolio?
- Scaling in – Did the manager add value through the way they scaled into their positions, or would a basic algorithm have done just as well?
- Size adjusting – Did the manager make beneficial mid-position adjustments?
- Scaling out – Did the manager add value through the way they scaled out of their positions, or would a basic algorithm have done just as well?
- Exit timing – Did the manager add value through the precise timing of their exits?
Portfolios with Behavioral Alpha Scores > 50 (which appear to the right of the dotted line) have managers who have been adding value through their overall decision-making over the last three years. Those with scores < 50 (to the left of the line) have been destroying value.
Aggregate trends from our prior rankings (all based on 36-month timeframes):
| Median BA Score | Percent of portfolios adding value |
Percent of portfolios with a hit rate over 50% |
Percent of portfolios with a payoff over 100% |
|
| Ending 2025-Q4 | 47.7 | 39.3% | 19.0% | 50.3% |
| Ending 2025-Q3 | 49.3 | 48.1% | 21.8% | 56.4% |
| Ending 2025-Q2 | 50.6 | 53.4% | 21.4% | 67.9% |
| Ending 2025-Q1 | 47.8 | 40.2% | 22.1% | 51.6% |
| Ending 2024-Q4 | 48.7 | 43.0% | 31.7% | 55.7% |
| Ending 2024-Q3 | 49.3 | 48.3% | 22.5% | 57.3% |
| Ending 2024-Q2 | 50.3 | 55.7% | 21.6% | 63.6% |
| Ending 2024-Q1 | 51.4 | 56.9% | 25.0% | 65.3% |
| Ending 2023-Q4 | 50.3 | 52.5% | 30.8% | 62.5% |
| Ending 2023-Q3 | 50.6 | 53.3% | 24.4% | 67.8% |
| Ending 2023-Q2 | 50.9 | 56.5% | 28.2% | 71.8% |
| Ending 2023-Q1 | 51.6 | 63.6% | 28.4% | 79.5% |
| Ending 2022-Q4 | NA | 46.7% | 23.3% | 63.3% |
| Ending 2022-Q1 | NA | 43.4% | 18.4% | 68.4% |
About Essentia Analytics
Essentia Analytics is the leading provider of behavioral data analytics services to professional investors and allocators of capital. Led by a team of experts in investment management, technology and behavioral science, Essentia combines next-generation decision attribution analytics technology with human coaching to help both equity fund managers and allocators identify investment skill and bias — and capture performance that was previously being lost to decision-making deficiencies.
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