Last Friday night, I happened to be watching James Murdoch giving testimony for the second time to the British Parliamentary Committee investigating the phone hacking scandal and it made me wonder whether there is a lesson to be learned for investors.

Murdoch’s defence was that in such a big organisation as New International, it is unrealistic to expect the person at the top to know everything that is going on.

The interesting issue for me was that apparently News International was “outperforming” its competitors in the “scoops” it was getting. (We now know the sources of the “scoops” but that is not my point). The point here is that News International was outperforming its competitors by significant margins and apparently nobody (not even the CEO) was asking how.

Bernie Madoff, during the height of his apparent outperformance also had very few questions asked of him. Even highly reputable, highly astute and highly experienced investors were content to accept the apparent truth that Bernie was just superior.

The lesson for all investors is that where one investment or manager is significantly outperforming the benchmark or peer group, surely just as many questions need to be asked. Understanding the “why” is always more important than simply knowing the “what”. Temporary underperformance is acceptable if there’s a good reason. The old adage “if something is too good to be true, it probably is” is apparently not that easy to apply for the beneficiaries of superior performance.