By Niki Natarajan
If the consultant is just not that into you, you have probably reached a Tipping Point and you have to do more than just invest, hedge, pray. It’s time to untether the investor and Awaken the Giant Within so that you uncover The Secret of the power of new to heal your portfolio so that you can go down The Road Less Travelled to discover who stole your credit. Only then will you learn the seven habits of highly successful investors and become your own alchemist to play the game of investing successfully.
I was having bit of a giggle when I wrote the agenda to the latest InvestHedge Forum vandalising the titles of well known self- help books. I expected to be told to stop mucking around and write a sensible programme, but much to my surprise my self-help guide to hedge funds stuck (full write up to come next month).
Now as I mess around further with the session titles to gain inspiration for this month’s editorial, it strikes me that the investment journey is not that different to the journey of life.
In both there are two types of travellers; those that are awake and those that are asleep. Enlightened investors are conscious of the interconnectedness of everything in finance (and beyond), while those investors that are asleep allow themselves to be guided by a guru to the next great gimmick.
In Sanskrit guru means teacher, but these days the word has been extended to cover anyone who acquires followers, especially by exploiting their naiveté. Indeed, guru investing has seen manifestation and subsequent portfolio destruction by portable alpha and 130/30 investing and the recent revival of portfolio insurance in the form of risk parity.
In the UK, multi-asset investing is staging a comeback . Applying tantric philosophy to multi-asset investing means that per se it is neither good nor bad, but it is the intention behind its creation that is crucial. Whether it was created to raise assets or protect a pension will ultimately dictate its karma in a client’s portfolio. Remember balanced investing of the early ‘90s?
How else can funds of hedge funds invest in different managers in the same strategies and achieve such widely divergent results (look out for the InvestHedge FoHF award winners next month)? And yet, like the Buddhists in Tibet, FoHFs are being chased out of their territory and their philosophy is being adapted to suit the new regime, which if the recent Saïd Business School report gains traction, might not last as long as originally anticipated in its current unregulated form.
Some investors might believe that these days FoHFs are only really suited to doing the boring work of operational due diligence and regular office visits, but due diligence is like meditation. It looks like you are napping but its effects are transformational. So why do so few investors want to invest the time, money and energy to do it effectively?
In fact due diligence has been deemed so simple that it has commoditised in the form of the Hedge Fund Due Diligence Exchange . The founders might be ‘veterans’ with a lot of gravitas implying grey hair, but are they all ready to roll up their sleeves and poke around in the dark corners of a portfolio manager’s psyche? More importantly does this exchange take any responsibility for the notes that it will circulate?
After hearing Aberdeen’s Keith Flashman in the art of due diligence: a handbook for investing safely (see events story here) I am convinced that no investor can reach enlightenment without ‘grit under the nails’ due diligence. Even if it is to select their adviser or consultant in the first place. How else will you know if your manager has the moral fibre required to manage pensioners’ money safely? How can you tell if a CV is real or creative fiction? I can honestly say I have been in asset management for 20 years, but does writing about it qualify me to manage money?
FoHFs hang in there, I am pretty convinced that there is investment dharma. Until the cycle zooms round again, remember the words of Eleanor Roosevelt: “No one can make you feel inferior without your consent.”