One of the best guides to how confident fund managers are feeling about the markets is how they desc...
One of the best guides to how confident fund managers are feeling about the markets is how they describe their investment style.
The current buzzword is 'stock picker' but four years ago it was 'growth' or 'thematic'. What has changed is the direction of the stock market. Back then it was heading up but now it is going in the opposite direction and no one is quite sure what it will do next. Being called a 'stock picker' is not just a neat way of sidestepping the issue, it is a tacit admission no one expects the index to rise in the foreseeable future.
As such, it is a sign of many groups' lack of confidence in the markets rather than a long-term commitment to a particular style of investing. No doubt this lack of confidence is being increased by the tougher environment facing financial services groups and their employees.
The only certainty is that not every group currently calling itself a 'stock picker' will be doing so in five years time, just as many groups that currently call themselves 'stock pickers' were not proclaiming themselves to be so five years ago.
There will be times in the future when markets ignore the fundamentals behind good quality companies. At that point, plenty of managers and groups will find new valuation methods for stocks and descriptive tags for themselves. Then, today's wise fund managers with a reassuring level of experience are likely to be branded out of touch old timers.
The lesson from this is that investment groups can be fickle when it comes to how they describe themselves. No doubt all those that proclaim themselves 'stock pickers' are; after all, every actively managed fund has to pick stocks at some point, but some might be emphasising this element of their activities to the exclusion of others.
Apart from the fact managers remain gloomy on the outlook for markets, the changing investment styles they claim to follow show just how important it is for investors to understand exactly what their fund manager is doing.
Good fund managers do come up trumps in the long term but they also go through periods of underperformance. Anthony Bolton, Bill Mott and Neil Woodford are all heros today but each has had some tough times and suffered criticism within the past few years.
Just as markets are cyclical, so too are the descriptive tags managers attach to themselves. Interestingly, 1970s fashions are back in vogue; also an era of market crashes, terrorism and Middle East tension. Coincidence?
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