Foreword by Clare Flynn Levy
I received a great piece of advice back in the 1990’s when I first started out in London as a young fund manager at a large European asset manager:
A lot has changed since that day, but that advice has never been more relevant.
The active management industry today is buffeted by the rise of passive strategies and insistent calls for higher transparency and lower fees. Not a day goes by without some new article predicting the demise of the human-led fundamental investment managers.
Despite these headwinds, I believe that fundamental investors will not only survive in the future, but thrive.
Research has shown that human brains are still far better than computers when it comes to making the finely balanced judgment calls required in complex and ever-changing financial markets.
This advantage is increasingly supported by the asset management industry’s growing adoption of data-driven feedback loops, similar to those employed in professional sport and other high-performance activities.
Many of today’s managers realize that there’s no longer a competitive advantage to being smarter than everyone else or even having access to better information. All that has been commoditized. What’s left is “behavioral alpha” — the excess returns that can be generated by “knowing thyself” and being more focused on self improvement than the next person.
Today’s most thoughtful investors have a wealth of experience to share with the next generation of fund managers. Each offers a different perspective, but they all share a focus on the importance of learning and reflection.
What makes a good fund manager? A willingness to learn, from your own success and failures, but also from the wisdom of those who came before you.
With that, I’d like to thank the Essentia clients, Essentia Insight Partners, and members of the investment community for their contributions below.