Picking the right stocks is the 2nd most important skill in equity investing.

The research process is vital. Its not no.1 though.

I heard this quoted yesterday by a newly hired and very impressive CIO. She said;

"The investors chief problem here is already clear to me - it is likely themselves. In the end, how your stocks behave is much less important than how you behave and most investors don't analyse how they behave with any rigorous approach"

I was the first to shake her hand and tell her she'd nailed it !

#investing #research #assetmanagement

I escaped the banking rat race 22 years ago.

My secret weapon is less corporate ambition.

I don't :

-want to build the next unicorn.

-want to manage thousands of staff.

-want to get a higher valuation multiple.

Instead:

-I want to spend my time working on things I really enjoy and with people I enjoy.

-I want to be able to travel wherever I want to, whenever I want to.

-I want to spend more time with close friends and family.

-I want to stop doing things I don't like doing.

Thinking about what you want can take you down a different path.

The path is living more intentionally.

Are you copying someone else's life?

Or designing your own ?

#banking #goals #qualityoflife

It is crucial that every professional investor on the planet practice their skillset.

Every world number 1, irrelevant of sport, sees it as a non-negotiable.

Remarkably, 95 out of 100 investors can't define what it is to practice!

The greatest skill one can develop as an investor is decreasing the time between understanding the definition of practice and consistent execution of it.

It's a strategic and purposeful approach to skillset that goes beyond just repetition.

Start by identifying a specific area of your process that requires improvement.

Am I better at buying, selling or sizing ?

If your goal is to improve your selling, understand what you tend to do badly as regards exiting.

Link to your personality data.

Identify those who are good where you are weak.

Understand how to capture specific data on this activity.

These things could be done alone, involve working with a coach or mentor, by seeking feedback from colleagues always using data and analytics to track your progress.

Make practice a part of your daily routine, Embrace the discomfort and challenges that come with it and see them as opportunities for growth and improvement.

The blunt message is,

No practice = investing mediocrity.

#mambamentality #womeinfinance #hedgefunds #assetmanagement

The Investing 'Game'.

Around 50 years ago the idea of a 'winner's game' and a 'losers game' was introduced by Simon Ramo in his book, 'Extraordinary Tennis for the Ordinary Player'. It focused on the difference between the type of tennis played by professionals and amateurs. He concluded from in depth analysis that in Pro tennis, the victor wins more points by taking risks ( a winner's game) whereas in recreational tennis, the victor is the one who makes the fewest mistakes (a loser's game).

Charley Ellis (the founder of Greenwich Associates) applied this logic to investing. In a seminal article written in 1975 in the Financial Analysts Journal he concluded that investing was (and still is in 2021) a losers game.

I have a framed gift from an investment client :

"I used to think my edge in life was being smart but it really isn't. My edge is being not stupid. There is a big difference'.

There are two very big issues with active investing today:

1) Investors don't realise they are involved in a loser's game

2) If they do realise 1) the majority aren't sure of the rules !

I quote below from Charley Ellis' original article:

"For those who are determined to try to win the Loser's Game......here are a few specific things they might consider.

First, be sure you are playing your own game. Know your policies very well and play according to them all the time. Admiral Morrison says: "Impose upon the enemy the time and place and conditions for fighting preferred by oneself."

Second, keep it simple. Tommy Armour, talking about golf, says: "Play the shot you've got the greatest chance of playing well." Ramo says: "Every game boils down to doing the things you do best, and doing them over and over again." Mies Van der Rohe, the architect, suggests, "Less is more." Simplify the professional investment management problem. Try to do a few things unusually well.

Third, concentrate on your defenses. Almost all of the information in the investment management business is oriented toward purchase decisions. It's too hard to outperform the other fellow in buying. Concentrate on selling instead. In a Winner's Game, 90 percent of all research effort should be spent on making purchase decisions; in a Loser's Game, most researchers should spend most of their time making sell decisions. Almost all of the really big trouble that you're going to experience in the next year is in your portfolio right now; if you could reduce some of those really big problems, you might come out the winner in the Loser's Game.

Fourth, don't take it personally. Most of the people in the investment business are "winners" who have won all their lives by being bright, articulate, disciplined and willing to work hard. They are so accustomed to succeeding by trying harder and are so used to believing that failure to succeed is the failure's own fault that they may take it personally when they see that the average professionally managed fund cannot keep pace with the market."

Using more probability theory and less macro prediction.

Prediction is concerned with some level of future certainty.

Humans are hard wired to abhor uncertainty.

So it makes sense that;

Lots of Economists, Strategists and Investors try to predict things that will happen in the macro future.

Prediction is possible only in a world in which events are preordained.

But it is a world of myth.

You can be right with a prediction but being consistently right is not possible.

"The trick is not to predict an unknowable future but to try and understand the present and the probabilities of the various paths that may exist from it"

Bill Miller.

#linkedin #newyearsresolutions #future

A false reality.

Dieticians won't make you slim.

Teachers won't make you smart.

Mentors won't make you rich.

Coaches won't make you skilled.

The reality is, you have to take responsibility and want to change.

#investmentcoaching #investing #hedgefunds

Reflecting on the amount of useless investment analysis in 2022.

(Revisiting a prior post and adding thoughts from Stephen Schwarzman's book, 'What it takes to make good decisions', thanks #PaulBerry)

Imagine you walk into a wood-panelled courtroom. There are just 3 people present. There is a prosecutor presenting her 25-slide Powerpoint to the judge who is sitting in robes behind a raised desk, and a sole defendant seated. The slides make a compelling case for the guilt of the defendant. The judge challenges many of the facts in the presentation but the prosecutor defends her analysis forcefully and well. The judge then gives his guilty verdict, sentences the defendant and proceedings end.

Not due process most would agree?

But this is an analogy used by professor Olivier Sibony that illustrates the often poor state of investment decision making by many smart professionals. I will explain.

A research analyst pitches a stock idea. Lots of detailed work has clearly been done on the company, but it's basically one person’s view of the story. The analyst has a choice of which points she wishes to make and how she wishes to make them. It falls to the final decision maker, the PM, to be both the challenger and the ultimate judge. But it's a poor process, right?

Building a good decision-making process is largely ensuring that these flaws don’t happen. It's rare to find an analyst with an explicit, ex-ante, disciplined decision process. In most investment firms, inspired analysis is what matters.

Schwarzman's book comments on Blackstone's initial approach to disciplined investment decision making;

'It is easy to fall for a good sales pitch. Once during the early days of Blackstone, I heard pitches from two partners who had opposing views on whether or not we should invest in a steel company called Edgcomb. I backed the partner pushing for the deal – in large part because he had the stronger presentation with more detailed information supporting his view. The investment ended up failing spectacularly.

I vowed this would never happen again. Blackstone needed a process for making investments. Since then, all senior partners are involved in our investment decisions – there is no “King Solomon” single-handedly green-lighting a deal. We never talk to just the lead partner on any potential investment. Everyone involved – regardless of their seniority – is expected to voice their opinion and participate so that we can incorporate all perspectives into our analysis.

By working together, debating opposing points of view and applying our collective wisdom and experience to evaluate an investment’s risks, we are able to examine our deals more objectively.'

Few understand that the process we use to make decisions is more important than the analysis we put into the decision.

A disciplined process is the best place to improve the quality of decisions and guard against common decision-making biases.

Enhance this in 2023!

#analyst

The missing role of questioning investors.

"Machines are for answers; humans are for questions.

In the world that Google is constructing—a world of cheap and free answers—having answers is not going to be very significant or important. Having a really great question will be where all the value is'

This from Kevin Kelly the founding editor of Wired magazine.

The active investment world loves answers and loves to support PMs with clever software and systems. But the role of questioning investment decisions makers is broadly overlooked.

Of course, I am biased - my job is to ask structured questions of discretionary investors. But hear me out.

I am often shown answers but 9 times out of 10, I don't find them significant or important.

One example. You can run a portfolio optimisation (answer) but it's of almost no use unless you have a process to question the aims and practical restrictions of the PMs approach.

What is scarce in a technology obsessed investment world is the questioning process. A good series of questions can unleash tremendous awareness, learning and ultimately performance.

Are team leaders or CIO's adept at using a questioning process or Socratic Method? Not even close!

It is a process of asking questions of PMs in order to expose underlying assumptions. It is both cooperative and argumentative. It is a strategy for establishing ground rules.

It can be used very effectively to clarify an investment style or risk rules or crucially, be part of an approach to understand a PMs natural behavioural tendencies.

Imagine a CIO works with you for 2 hours on a series of questions that includes;

What level of loss per position starts to mess with your head?

How frequently do you need to re-assess your conviction on an existing holding?

Are you curious to understand how you and your team are risk diversified as characters?

What part of your process tends to generate or destroy the most alpha, buying, selling or sizing ?

Asking questions to understand a process isn't the same thing as saying I don't like your process.

The truth is the leaders of investment organisations don't know how to do this. However in recent years I have begun to meet senior figures with more foresight who are taking action to address this issue.

In one memorable exchange a PM shared this with his CIO in my presence....."Isn't it strange that following one 2 hour questioning session with this guy, he without doubt knows me much more authentically than you do after 3 years of us working together!"

Before leveraging the multitude of technology based support systems for PMs, leaders need to realise that machines need human intelligence to be actionable.

Train the leaders to do this or outsource it to those that can.

What becomes really valuable in a world running under Google's reign, are great questions and humans will be better at that than machines for some time to come.

Coaches are the prologue before the all important chorus of machines.

The billion dollar investing remix.

Like music, investing is both art and science. Everything is a remix.....

So, what is each investor's version of the remix?

Ask great entrepreneurs like #elonmusk, #richardbranson, #stevejobs ....

"All the interesting jobs are the one's you create."

Active investing rewards the rare, not the commonplace.

Discovering your version of the remix is hard.

So hard in fact, that most never do.

All too easy to copy the music of others, whilst kidding yourself you have created your own.

It's the malaise of the industry.

An apt chorus from Chris Martin.

".......Castles stand upon pillars of salt and pillars of sand"

The deafening sound of karaoke investing.

I say, you owe it to yourself to stand for something..... a code, a mission...

YOUR REMIX.

So the launch of #$billionRemix

Think of me as a record producer for a new label.

Here's the game....

Audition the talent.

if signed

we work 1:1

we go deep

we create your remix

The 'deep' is in 2 steps

Step 1 - 'The Art'

Uncover your talents, strengths and risk mindset. Translate to your own genre. Your philosophy of investing.

Step 2 - 'The Science'

Using probability theory and practical tools calibrate your process. Process for asset selection, risk management, macro understanding, portfolio construction and practice regimes.

The result is an authentic remix.

We amplify your process but the results are never the volume of applause, but the quality of performance and a long term reputation.

I will work with those that say 'Hell Yes' to this quiet intro.

& IMPORTANTLY......it's not only for the active investing pro's .....

If you're between 20-25, obsessed by investing and want to make some noise as an investor, then you can audition - email me for the rules ....if you're signed ...#nofees !

info@salomon-partners.com

Viva la Remix.

#$billionRemix #investing #sustainableinvesting #stocks #sustainable #karaokeinvesting #coldplay #HellYes

Want to be right or make money?

Opinions on stocks are more often than not worthless in isolation but when gathered from multiple authentic sources they can be helpful to

a PM.

However, the vast majority of PMs don't realise how hard they work in trying to prove themselves right once they have formed a view on an asset.

They subconsciously hold onto the ideas and evidence that reinforce their beliefs and dismiss anything that counters.

This unconscious approach to focus on proving themselves right, instead of focusing on achieving the best outcome, might well be the most pervasive bias I see, day in day out, with active investors.

A common truism in elite investors is that the more they give up trying to be right, the better the outcomes get for the team.

It's never about who gets the credit it's about the fund making money.

#assetmanagement #money #investing #hedgefunds

"A vast unexploited opportunity for asset managers - an open goal"

This is the conclusion derived from having spent a large part of the last 7 weeks talking to a cross section of global asset owners.

But almost all large asset managers don't see it !

Even many of the asset owners didn't see it clearly.

But 100% of them I talked to agreed with the quoted conclusion.

What's not seen ?

Ok.

To raise and keep assets in a fund, the cold, hard truth is;

The fund must be trusted by an allocator.

1, 3 and 5 year fund performance might be accurate data,

.............but it's not fundamental to trust.

Years of investment experience and prestigious education might be part of the credentials of the manager,

...........but it's not key to trust.

What is owned in the fund is important to investment process,

...........but it's not at the heart of trust.

What is fundamental to being 'trusted as an investor' ?

I can't trust you as an investor, unless I KNOW YOU.

Helping an allocator 'know you' is paramount to keeping assets and growing assets.

But the industry doesn't get it.

it kids itself that the box is ticked.

Knowing you and your team is having a memorable and personalised investment philosophy.

Below sound familiar ?

We believe markets are often inefficient over the short term due to the behavioural biases of market participants. We believe in exploiting these inefficiencies by buying attractively valued growth companies at a discount and holding them for the long term. We use our deep dive sector expertise and combined 65 years investment experience to identify .....blah, blah.

Useless!

Completely generic and not about building trust !!

This is the open goal opportunity.

Trust is communicating your core beliefs and values as an investor in a deeply personal way.

Trust is describing your talents and strengths, how you tend to think, feel and behave in the markets and your attitude to risk. Trust is clearly communicating the timeframe for your objectives with compelling stories.

Over the next weeks and months myself and partners are bringing to market a new coaching product that addressees this opportunity in a innovative and cost efficient way.

It is an investment philosophy playbook for asset management firms who wish to differentiate through trust.

It will transform useless philosophy into clear, concise and memorable philosophy.

Focused on knowing individuals and the team to create trust.

The philosophy playbook will be customisable for asset management firms.

For some teams a high human touch involving a coach will be preferred or for others a low human touch tool using more natural language processing driven by AI technology.

In both scenarios AI will allow the costs to be realistic.

We are now building a list of interested firms to pilot the initial approach.

Please share with others if you think a leader might be curious to strategically explore the open goal opportunity.

#ai #assetmanagement

In investing, this really is nuts.

The responsibility sits with the buyer of your fund to convince themselves that you have sufficient SKILL as an investor for them to entrust you with their money !

The Portfolio Manager doesn't mention their SKILL in any pitch or client meeting.

To the outsider, that sounds wacky!

To me, it's a very BIG opportunity in 2023 that most investors bypass.

Instead, the mainstream continues to talk about their ideas or investment themes with some spin linked to recent performance.

Why wouldn't you give the clients what they want ?

There are 3 major reasons ;

1 - You don't have much skill, so why talk about it.

2- You don't know what it is.

3- You focus on stuff that's easy to prove and seems to be a proxy for skill - like near term returns - and hope like hell it remains ok !

The BIG opportunity is to spend time with your current and future audience specifically talking about YOUR SKILL.

My job as a coach is to define and develop skill in all those investors I work with.

So let me spell out the opportunity.

GET HELP TO BUILD A STORY AROUND YOUR APPROACH TO SKILL.

THEN, AFTER 3- 6 MONTHS OF THIS WORK you will be ready to raise real $$$ by being differentiated.

It's a learning process and requires getting out of a comfort zone

It also ain't cheap.

If you are open to 3- 6 months of challenge - message an investment coach.

There aren't that many out there !

My hourly rate only kicks in after an initial chat :-)

#investing #India #socialmedia #institutionalinvestor #hedgefundmanagers #storytelling

The Bezos mini-MBA program.

Re-read all of his annual letters to shareholders going back to 1997.

This excerpt from 2016 is hyper-relevant to investors.

"Good process serves you, so you can serve customers......

But, he adds....

It's not rare to hear a junior leader defend a bad outcome with something like;

"Well, we followed the process"

A more experienced leader will use it as an opportunity to investigate and improve the process.

The process is not the thing.

It's always worth asking do we own the process or does the process own us"

I see this all too often in investing.

Whilst I preach 'clarity of process', investment processes are living things and need to evolve.

The evolution comes from feedback loops.

Having an explicit mechanism to decide if your process needs updating is a lesson from the Bezos mini-MBA.

#investing #mba #coaching #jeffbezos