I recently read a very interesting article on the Chief Investment Officer website (www.ai-cio.com), by Elizabeth Pfeuti, where the question posed was how much coaching do fund managers actually receive and should we expect them to?
Elizabeth’s article quoted Patrick Mouratoglou, the respected French tennis coach, who in a relatively recent interview said “She can improve a lot. Her game at the net can improve and the transition from the baseline to the net can be improved a lot. Her swing volley can be better; she sometimes hesitates to move forward….” Whom was he discussing? None other than Serena Williams and, as her coach, how he believed she could improve her game. More importantly, this was not a couple of years ago when she was struggling to perform, but in a March 2015 CNN interview, just after she had won the Australian Open and was about to go on to claim the French and Wimbledon Grand Slam titles.
Elizabeth also queried just how many fund managers believe their successes are purely down to skill, never luck? Are their egos potentially blinding them from further improving their game? Many of the world’s top sportsmen and women all have strong egos but are not so naive as to think they no longer require a continuous coaching regime, to refine their skills if they want to stay at the top of their respective sport. Serena Williams’s game roughly involves 85% skill & hard work and 15% luck, or as the golfing great Gary Player once put it “The harder I practice the luckier I get.”
How many fund managers have a coach?
Egos and mediocrity are sometimes a problem in the finance industry, when the total focus is solely on results and not the training regime or long-term investment process. If your fund manager(s) maintain that you are remunerating them for their superior skill, but they refuse to take advice or ongoing training to improve their performance, they may eventually find that their luck will run out.
This particular question is pertinent for owners or managers of businesses that employee fund managers, or wealth management/ institutional businesses that asset allocate to fund managers. The reality is that very few people are natural fund managers and stock-picking is not a skill we are generally born with. These are skills we must work hard at and have a clearly designed process around. Whilst none of this is new news, the concept of fund managers needing coaching, on the same basis as the world’s best sports people, perhaps is.
Quoted in the CIO article, Fredrick Martinsson – CIO at Danish Pension Fund ATP – stated “(O)ur industry puts too much emphasis on people believing they are geniuses or have some kind of sixth sense. That is rubbish. There are some brilliant people, but what makes them brilliant is the interconnection between protocol and details – their process.” Indeed, we would argue that being passionate and genuinely concerned about investor requirements are far more important long-term traits. The investment industry has become too focused on the output (performance) and ignoring the inputs (process and training/ coaching).
The article also reports that Morningstar’s UK Director of Manager Research, Jeremy Beckwith, has spent years meeting fund managers and evaluating their performance and he felt that few people have delivered and shown real skill, but those who do deliver have similar characteristics. “They are passionate and single-minded about investing. “They show humility and realise that at least one-third of their decisions are going to be wrong. The successful ones want to learn when they are wrong and when to cut their losses.”
This was brought home to me a few years ago when I met with a potential investor, having just won a couple of industry awards, who pointedly asked what big mistakes I had made? “None” I replied, as my five year numbers were top drawer and I had just won the awards. At that point, he politely told me he would only look at investing after I made a big mistake. Only a few years later did I fully realize what he meant.
What should fund manager training/coaching encompass?
In the same way that one never hears Serena Williams blame anyone or anything other than herself if she does not perform to her best; for a fund manager, the Fed, the markets or liquidity should not be to ‘blame’, but more a hurdle to be negotiated. As such, fund managers’ ability to learn from their “opponents” is paramount. On top of that, research, hard work and the willingness to learn from your own mistakes, as well as your successes, is mandatory. How many fund managers are able to put their ego aside and accept advice from a coach?
The ultimate conclusion gained from the article was that the tide may be about to turn, at least for those who want to see their name consistently in lights. One needs a sounding board; a coach and a teacher rather than just waking up and thinking you are a rock star – job done!
Perhaps it is time for us to start asking whether a fund manager is receiving coaching as part of our manager selection process…
[Source: http://www.ai-cio.com/channel/NEWSMAKERS/Uncoachable/ – September 11, 2015 – by Elizabeth Pfeuti]
MitonOptimal Weekly Comment - Week 40, 2015