The tumult caused by Richard Buxton’s move from Schroders to Old Mutual in March highlighted the veneration of “star” fund managers, those select few who apparently rise above the crowd to shine their light upon adoring investors.
We don’t need to dwell on Buxton’s track record (annualised return on his UK Alpha Plus fund of 13.7 percent over 10 years), but combined with Mark Lyttleton’s departure from BlackRock – his own star rather faded of late – I am drawn to ponder the funds industry’s views of, and hunger for, stellar talent.
It is attractive, and reassuring even, to believe that the people running our money are blessed with some innate skill for playing the markets, but I recently had to re-consider my own views on natural talent when talking to Matthew Syed, now a journalist and author, but previously England’s number 1 table tennis player for a decade. A competitor at two Olympic Games and winner of three Commonwealth Gold medals, Syed has some experience of being praised for his apparent natural ability.
He contends that some of our most cherished notions about natural talent are misplaced. Instead he argues persuasively that practice, opportunity and belief are far more important than genetics in determining success.
In a nutshell, Syed asserts that “when you look at the science rather than our own implicit biases, you arrive at the conclusion that champions are not born, they are made.”
Rather than going through these arguments in full, which Syed does best himself in his book ‘Bounce’, I will focus on a few aspects that have direct relevance for the funds industry and the cult of the star manager.