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Diary of an Investor: Every ash cloud has a silver lining

A short excursion to London at the end of April turned into a longer stay than I had expected. I had flown over on a Thursday morning for a day trip to make site visits to one or two of our investment managers, and to see our global investment consultant.

The meetings were uneventful, but the time allowed me to ask detailed questions. Sushi lunch with our Japanese equities manager meant an interesting discussion about politics in Japan, while later that afternoon our quant equities manager, a Californian, assured me that his strategy was set for a prolonged period of outperformance. When the pleasantries were over my tone at both meetings was sceptical and critical, given that both managers have been giving us cause for concern at Wasserdicht Pension Funds.

I left both meetings with the uneasy feeling that we should invite both of them for a formal review. But when I asked our global consultant for his opinion he was unequivocal.

‘You appointed both managers less than three years ago. Given the market turmoil recently you need to consider longer than two years’ track record. We are now recommending that clients retain managers throughout the market cycle to reap the full benefit of their strategy.’

‘Our longest manager tenure is over 10 years,’ I assured him. ‘Then you should consider implementing performance-related fees on a three-year rolling basis,’ he replied. ‘Good luck,’ he added as he showed me to the lift.

The invisible ash cloud that slowly made its way across Europe meant my flight back to Amsterdam was cancelled and so, after a night in a hotel, I hitched a lift with a friend of mine, Johan, who now works for a hedge fund manager, and who was desperate to get across the channel to make a client meeting in Milan. We parted ways in Calais, but the trip through Kent, and lunch in the truck drivers’ canteen on the ferry, left us time for some interesting discussions.

‘How is business,’ I asked Johan as we settled in our seats for a British speciality - gammon ham, chips and peas - and watched England’s white cliffs disappear into the distance. ‘Great,’ he replied.

‘We’ve been shorting European government bonds for some time now in expectation of fireworks in Greece. Now the time has come to reap the rewards.’

As I sat on the train from Calais to Lille and then on to Brussels I settled down to read the financial press.

The turmoil in Greece led to a thought: forget your Japanese equities and your quant manager for now. This is the time to short airline stocks and Greek bonds. Airline CEOs should be looking for another job soon. But what about the Greek politicians?

Pieter Mullen is investment director at Wasserdicht Pension Funds

 

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