What the Investment Managers Don’t Want you to Know

November 25, 2019

Words by Freya Savage

I’ve got a secret to tell you about the investment world.  I worked with the CIO’s (the ones who make the investment decisions) of the most well-known fund managers in the world. I also worked with high net worth clients advising them on their investment portfolios. We all made things complicated.

We were getting paid very good money. We had all studied complex investment strategies, so it made sense to get paid well for something that was so complex. We were using hedge funds, short selling, analysing companies using quantitative algorithms, even investing in private almond farms (which did quite well mind you).

Every quarter the returns would come out, and most of the time we would NOT have beaten the market. The fund managers we worked with?….

Most of them hadn’t beaten the market either. These guys had been to Ivy League schools, they were really, really smart.  It wasn’t like we weren’t trying, we were throwing everything at it. The advisors and managers really want to succeed, so we would stay on top of geopolitics, shifting across asset classes depending on where we believed the economy was going, constantly evaluating the companies in the portfolios, we were very active.

But we weren’t alone in the results that active investment brings. In fact, about 70% of the time fund managers and advisors do not beat the market. Active investors generate an average return of just 3.4%.

What exactly do I mean by beating the market? The performance of all the listed companies as a whole. So if you invested in every company on the exchange you would have done better than picking out the ones you think will do well, there are products

that do these for you called ETF’s. So my question to you is. If you’re investing already or thinking about investing, do you think you can beat the market? When you’re up against incredibly intelligent people who dedicate their lives to investing and they cannot outperform the market?

For me that answer is no. To pick your own investments take time, it involves reading the news and reading company reports. I’d rather pick up the easy 8.3% average return by investing in a few ETF’s each month (all on direct debit so I don’t even have to click any buttons).

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