Everything from my youth seems to be making a comeback: Oasis, the Spice Girls, Sex and the City, Top Gun, a Labour landslide, inflation and pre-financial crisis economic conditions. Fund managers, who are getting bored of reading central bank tea leaves, are yearning for the latter.
Luke Newman, who manages the Janus Henderson Absolute Return fund, said the biggest change in equity investing during the past two years has been “moving back to an environment where money now has a cost”.
“In terms of financing rates, the discount rate, interest rates, the cost of money, they're much more normal in a historical context” than during the post-financial crisis years of quantitative easing, he said. As a result, dispersion between share prices is increasing and is being driven by company fundamentals, more so than macro headlines. This is “great news for stock pickers”, he concluded.
If we are returning to a landscape more akin to the pre-2008 normality, surely it would be wise to entrust our savings to fund managers who have a track record from that era.
In some ways I am preaching to the choir. Most fund selectors look for experienced managers. But I want to make the specific point that some of that investment experience should have been garnered before the global financial crisis irrevocably altered our industry and ushered in a wave of central bank intervention.
I began my career in financial journalism back in 2002, interviewing UK pension funds back when they all still had a massive home bias. Then I moved to New York where I had a ringside seat to watch the financial crisis unfolding… but did I read the writing on the wall? Let’s just say that if you’ve watched The Big Short, you will have noticed that a plucky young English journalist was, well, nowhere to be seen. This still rankles. “Why didn’t you spot the financial crisis coming?” my father asked me over lunch last week. If I had, the lunch would’ve been a lot more lavish.
Which leads me to believe that we’re looking for fund managers who racked up much more pre-financial crisis experience than I did; in other words, somebody older than me. Late forties and above. When I interview fund managers in this age group, I do tend to afford them a greater degree of respect. And we tend to get each other’s jokes.
There are downsides to old hats, however. The longer you do something, the more patterns, prejudices and bias can set in.
To guard against this very thing, Mick Dillon and Bertie Thomson from Brown Advisory invite their colleagues to point out their blind spots at their offsite meetings every year. Mick admitted to a tendency to cleave to stereotypes that were valid in the past but are no longer true, such as semiconductors being a cyclical industry.
In the same vein, GQG Partners set out to hire a cohort of younger analysts who did not share the same prejudices as the rest of the team, whose fingers had previously been burned in the energy sector, for instance.
Most people now subscribe to the benefits of a diverse team but age is a facet of diversity that may not have been afforded the appreciation it deserves, and investment teams arguably need people of all ages to reach the best decisions.
So next time you have a big birthday, celebrate in style. Ageing is a privilege and it may just make you better at your job.