Favourites

François Zagamé

Old Mutual Voyager Global Dynamic Equity

The worst mistake I made was a few years back with the Gartmore UK Focus fund [which was later merged into what is now called Henderson UK Alpha]  I believed the portfolio managers when, as I was meeting them after a period of underperformance and their process had drifted a lot, they told me they had realised they had lost their way and were now going to revert back to their old approach.

This did not happen and they lost another 10% to the peer group before I realised my mistake and sold the fund. The managers left Gartmore shortly afterwards.

I suppose this is a painful example of managers able to fight their corner convincingly when their backs are to the wall. This was the last time I delayed a decision. There is nothing worse than the double pain of bad performance coupled with the knowledge that you knew what to do all along and did not do anything.

Too slow to act

Looking back at the most painful mistakes, from a performance and from an ego point of view, they all have one characteristic in common: they did not result from doing something wrong, but from not doing what was right fast enough.

Equity fund managers can become sentimental with a stock they have owned for a long time, and not sell it when fully valued. Multi-managers can get attached to a certain person, team or process and find reasons not to sack them even when it hurts performance.

Stephen Peters

Charles Stanley

Multi-manager

I would have liked to have bought commercial property funds at the bottom of the market. I would also have liked to have bought Electra Private Equity (ELTA ) at the end of 2008 or beginning of 2009. Having done analysis on the latter, I did not follow through with buying the shares.

Those were extreme periods though, and while I bought some things at attractive valuations, for sure I missed out on others.

The blame game

Most fund managers attribute success to themselves and failures to the market; multi-managers are no different.

Mistakes I have made include not fully understanding the sensitivity of the performance of particular funds to particular influences. Not appreciating the effect of movement of the euro/sterling exchange rate on the performance of a leveraged European property investment trust was one obvious mistake.

Another one would be backing funds or management teams I do not rate as particularly strong, in the hope of using their fund to benefit from a theme, as I did in late 2013 and early 2014 when trying to tap into commodities.

I learnt that my circle of competence is small (some would say very small) and that I should stick to things I know and, hopefully, understand.

I try to be long term in my views and approach to buying funds. Arguably, that is another mistake: not taking advantage of investment trust discounts when they present themselves as well as I could.

David Coombs

Rathbones

Head of multi-asset investments

In April 2013, we made a call that the worst was over for financials and we bought Jupiter Financial Opportunities and Polar Capital Global Financials  (PCFT ) investment trust for our Strategic Growth (medium-risk) portfolio.

Our rationale was that after four years of being under the regulatory spotlight and a target (in some cases justified) for politicians and repairing balance sheets, we might start to see some more visibility on banks’ earnings; and that this, in turn, could lead to dividend growth or in some cases the reinstatement of dividends.

Rationale proved wrong

However, we have had to review this thesis.

Potential new capital adequacy rules could come into force: the G20 is looking at total loss absorption capacity (TLAC), which would compel the top banks to hold capital of 16%-20% of risk-weighted assets.

The master plan remains to end the concept of ‘too big to fail’, and the ramifications of TLAC could continue for another three years. This continues to make earnings’ visibility complex, which undermines our strategy.

Whether the new regulations will work is a whole different debate, but what we do know is this is not great news for shareholders. In more recent months, we have also seen banks dragged back onto the political agenda through the predictably emotive subject of bankers’ bonuses. So at the end of last year, we sold out of our open-ended financials exposure and exited the funds at cost.