The Pride - Issue 5 - Autumn 2021 - Magazine - Page 4
INS I G HT
FOOTBALL, FUNDS & FORTITUDE
Liontrust’s Head of Multi-Asset John Husselbee on what the fund management
industry can learn from football.
hoodoo with the victory over Colombia,
data relating to penalty kicks reveal
interesting trends in behaviour. Figures
show the best strategy to save a penalty
is to stand still, with goalkeepers twice
as likely to make a save if they remain
in the middle rather than diving to
one side or the other. Only 2 per cent
actually stand their ground, however,
and this is due to action bias, where
the value of being seen to do something
is higher than that of doing nothing. In
investment, this is the equivalent of fund
managers feeling they need to keep
trading or reacting to events to justify
their fees.
consistency of performance is ultimately
impossible but, in our selection process,
consistency of investment process is key.
FOOTBALL: THE PRICE OF SUCCESS
Average annual salary (in million USD)
8)
13th
20th
5.3
7th
2.2
6.8
4.7
4.1
League Spend
Liverpool
Tottenham
Chelsea
Arsenal
Everton
1.8
Leicester
2.1
3.3
Newcastle
1.9
Bournemouth
1.8
Crystal Palace
1.3
West Ham
2.2
2.9
Watford
2.7
3.0
Brighton
2.9
6.8
5.8
3.7
Burnley
3.8
1st
3rd
Man City
(2017/1
Mn Utd
osition
League p
6th
Source: Google, May 2018.
4 - THE P R I DE - Issue 2 Winter 2018
In fund management, the price of longterm outperformance lies in truly active
funds. We see a role for passives to
capture short-term market moves but if
you want to generate wealth over longer
periods, evidence shows exposure to
some active managers is required. The
key is to find those managers who are
able to deliver value for higher fees.
Returning to football, while England
managed to dispel the 22-year penalty
Huddersfield
Similar logic can be applied to fund
manager selection, with very few able
to outperform every year. We believe
A final lesson from football relates
to the topical question of fees and
value for money. For the most part,
the price of success in the game is
clear if you compare league positions
with spending. Manchester City and
Manchester United had the highest
average salaries in the 2017-18
season and came first and second in
the Premier League respectively.
Patience is a cornerstone of our
investment process and we often talk
about preferring to be the tortoise
rather than the hare when it comes to
generating returns. We are keen for
our clients to get rich slowly and a vital
part of this is shutting out market noise
as much as possible and avoiding
overreacting to short-term events.
Southhampton
I recently watched a BBC documentary
where Sir Alex Ferguson discussed the
various responsibilities of a successful
football manager, and was struck by
how many of these read across to fund
management: from the relationships with
executives, analysing and picking the
players/funds, to keeping fans/investors
happy. The best teams are balanced,
flexible and patient – and made up of the
right combination of players in the right
positions rather than a wish list of stars.
Since the World Cup began in 1930,
there have been eight different winners
across 21 tournaments. Only two teams
have ever retained the trophy, with Italy
winning the second and third tournaments
in 1934 and 1938 and Brazil victorious
in 1958 and 1962. This shows that
winners tend to rotate and constant
success is impossible. In the investment
world, this highlights the importance of
diversified, properly balanced portfolios.
The same asset classes rarely top the
performance charts year after year.
Swansea
We have always believed the beautiful
game has much in common with
investing and can provide some useful
insights. Football, like running money,
is competitive, team-orientated, driven
by results and league tables, difficult
to predict – and, ultimately, far more
enjoyable when you are winning.
Changing short-term tactics, without
compromising a long-term strategy, can
be key to outperformance and football
shows the impact such tweaks can have.
Bournemouth were the Premier League’s
most successful comeback kings in the
2017/18 season, although they were
also behind more than many other
teams. Bournemouth managed to take a
total of 21 points from losing positions
in 27 games, winning five matches and
drawing six.
Stoke
Summer 2018 will be remembered for
two things: an exceptional heatwave
and the World Cup. France’s 4-2 win
over Croatia in July’s World Cup Final
left us to reflect on another tournament
of what ifs for England.
West Brom
JOHN HUSSELBEE
While we demand this long-term
consistency from our fund managers,
we also understand agility and flexibility
are important to capture opportunities
when they arise, and this is true as
much for our own portfolios as well as
the managers we choose.