PAST
have been had I not tried anxiously
to interpret every tug, grunt and
occasional exclamation.”
“Now, fund managers are not
surgeons, but does not a similar
situation exist with regard to
long-term savings and investment?
Worrying over the impact of events
beyond our control is something
nearly every saver and investor does
– but the worrying changes nothing
and has no impact on the eventual
outcome. Indeed, as with surgery,
a panic-struck premature exit may
prove to be painful.”
“My little homily would be to
metaphorically put your certificate
in the back of a drawer, forget it
and get on with enjoying life, while
others guide your savings. In 15
years, rediscovering that certificate
could provide a pleasant surprise.”
BE SCEPTICAL OF OTHERS’
MOTIVATION
Graham H Campbell, manager,
Saracen Global Income & Growth
“When I started in this business
more than 30 years ago, I spent an
enormous part of my days trying
to digest sell-side research in an
attempt to gain more knowledge
on a company or sector than other
investors. It was an impossible task
as there was too much, but that isn’t
why it was futile.”
“I met with a top-rated City
analyst who was about to present
his latest book on the transport
sector. When I asked him his key
recommendations, he replied:
‘They are as always: churn
vigorously!’ I also remember a piece
of research on an Irish company,
by an Irish broker, where the
close-knit community did not
welcome negative messages. The
recommendation was ‘buy lower’.”
“Clearly the interests of the buyside and sell-side are not aligned.
The core of my research now
involves manually analysing at least
the last five years of reports and
accounts. You can download the
data with the push of a button, but
it is more fruitful to make your own
adjustments and assessments, rather
than the ‘normalised’ versions that
trustnetdirect.com
“WITHOUT A DAILY
VISITATION, IT IS UNLIKELY
THAT YOU WILL GET YOUR
TIMING SPOT ON, AND
IF YOU ARE TOO EARLY,
YOU ARE LIKELY TO LOSE
YOUR INVESTORS BEFORE
THE RETURNS ARE
GENERATED”
management points to. It’s a lot of
work, but the analyst will have a
better feel on the underlying drivers
of the business and how it is likely
to perform through the economic
cycle. In addition, it is clear who to
blame when the investment does
not deliver the returns you forecast.”
PREPARE FOR THE WORST
James Thomson, manager,
Rathbone Global Opportunities
“I received such a kicking in 2008
that I had no choice but to adapt and
learn from my mistakes. What is
now glaringly obvious is the fund
was too risky and I didn’t have any
defensive holdings that might have
provided some buffer during periods
of market distress. And there were
some serious moments of distress.”
“But we live and learn, and
following the financial crisis we
changed our investment process
to include a defensive bucket of
‘weather-proofed’ investments.
These are companies with reliable
and predictable earnings streams,
which are less economically
sensitive – areas such as healthcare,
food and beverages, and even a
funeral home company. These
should provide a better layer of risk
management.”
“If I were to go back in my
personal DeLorean and offer some
wisdom to my younger self, it
would be to remember investing is
a marathon, not a sprint. It’s worth
dialling down the risk to create
an all-weather fund that will help
everyone sleep better.”
HOLD YOUR NERVE
James Klempster, portfolio
manager, Momentum Global
Investment Management
“I would encourage the younger
me to remember that if the equity
market falls by more than 40
per cent, be more aggressive in
adding risk. This is easier said than
done, however, in the modern
environment where risk controls are
a key part of the investment process.
But these moves afford such an
opportunity that it is almost always
worth taking on the discomfort.
“Unfortunately, it is unlikely you
will get your timing spot on, and if
you are too early, you are likely to
lose your investors (and job) before
the returns are generated. But still,
a market fall of this magnitude
should be viewed greedily even if
establishing an investment is done
more methodically.”
“There are exceptions to this,
such as Japan, where this approach
would have led to severe losses, but
on the whole it is valuable to have a
process that contains a genuine buy
discipline that forces us to consider
the real opportunity that may be
found outside our comfort zone.”
BE PATIENT
Steven Andrew, manager, M&G
Episode Income
“If I were to visit myself while
sleeping on Christmas Eve, the
lesson I would impress would be one
of patience. I have been managing
M&G Episode Income since launch
in 2010 and during the past five
years I have learnt just how fickle
and unpredictable markets can be.”
“It is important to realise that,
during periods of turbulence, the
worst possible action is often to
react in an emotional manner.
Instead, I try to control the instinct
to ‘do something’, take a step back
and attempt to respond logically.
“This approach can be
challenging, especially when the
rational response is to take no action
and wait for opportunities to unfold.
As long as decisions are based on
a coherent analysis of the facts, a
patient approach should pay off.”
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