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One of my friends son wants to be “fund manager”. He insisted my advice despite knowing I am not a FM. Lockdown helped me giving him some dope. Tips for future “FM”
1.Investing is losers game. Showing it otherwise is the real art of fund management.
2. Markets are complex adaptive system so inherently non-linear, uncertain and unpredictable. Real conclusion there are no “Experts” in markets. But FM need not worry clients equate expertise with hoursspent on CNBC
3.Everything is cyclical; including the cycle! Cycle inside cycle. Which is good because one is always right in context of one of the cycle. Knowing this helps writing investor letters.
4.Randomness rules in investing. Beware it will show in performance. In Good times be clear and simple in communication about your skills. In Bad times be very fuzzy and complex about everything in the world besides your skills.
5.Language gives meaning…meanings drives emotions…emotions drive behaviour. Never use probabilistic language. Be certain even if wrong. Confidence lulls clients, especially rich ones.
6. It is unlikely that unlikely event may not occur. On failing to do risk management for that …remind clients about unlikely bright future who knows it may also happen.
7.Focus on unimportant and unknowable. Knowable and important will not help make fat impressive presentations. And occasional fat presentation are must to justify fees and prove expertise.
8.Justify fees by showing busyness of business. Don’t ignore Noise, Signal is part of it. If you don’t know the difference don’t worry most don’t know.
9.Question everything. If you go wrong question everyone from management to finance minister (present & ex) go upto Nehru (in Indian context). Question so much that no one can question your ability of judgment.
10.When asked where market is headed? Be uncertain in near term, hopeful in medium term and bullish in long term. When you are very uncertain about near term be very bullish about long term. It is true very long term we are dead but someone else is born. Flag will fly.
11.Survival is the Key. Rule No 1 Don’t lose clients and if lose one wait for other FM to lose one of his. Rule No 2 don’t forget rule no 1.
12. Be greedy for AUM when greed rules. When fear rules wait for greed to return. This is true reversion to mean in FM’s context.
13. Be Antifragile - look for habits and rules that have survived long in gathering AUM. Returns are random anyways.
14. Think lightly about businesses and markets but deeply about investor’s letters. Never miss an opportunity to quote legends of investing.
15. If something makes sense to you …opposite is true too in some context. So on many occasion Nonsense is Nirvana.
16. Beyond a point no one know anything about anything..be sure it is especially true about your clients with respect to your lack of skills.
17. Map is not the Territory. A map covers not all the Terrotory and Maps of maps condense the territory. Such depth is not needed. So Chill.
