Signal & Strategy column
James Steere, Head of Operations, Perspective Investment Management
A great active manager should deliver more than just returns. As an investor you also need to see informed confidence, context, and clarity from your manager to help you stay committed to your strategy, especially during periods of above normal volatility and perceived uncertainty.
The real value of an active fund manager isn’t just in generating returns, but in helping investors understand where those returns came from, and where they’re likely to come from next. Consistent transparency builds trust over time. If investors have a clearer view of what’s driving long-term outperformance, whether it’s positive or negative, then they’re probably less likely to sell at the wrong time and more likely to stay invested, improving their chances of achieving their long-term objectives.
That’s why communication is so important. The best managers treat communication as a core part of their role. It’s not just about reporting results; it’s about delivering meaningful insight with honesty and consistency, and engaging investors with accurate truths.
It’s during the more serious market downturns or economic shocks that communication becomes truly critical. These are the moments when fear tends to override logic, and when some investors are most vulnerable to making short-term, emotionally driven decisions that hurt their long-term goals.
In a previous article, I focused on how market timing doesn’t work. This remains true, and trying to predict short-term market price movements is not a wise strategy. But that doesn’t mean timing has no place in investing. However, there’s a key difference between trying to time the market and behaving counter-cyclically. The latter simply means maintaining discipline and becoming positive when markets are down and the consensus sentiment is negative. History has shown that these are often the best times to invest, provided we have the conviction and clarity to act.
This is why, at Perspective, we aim to deliver not just strong time-weighted returns (how the fund performs overall), but strong money-weighted returns as well – the returns our investors actually experience. The gap between the two can be wide. Industry studies clearly show how some investors who chase performance can easily end up with returns that lag the fund itself. But those who remain steady, or better yet, invest more during the lows, often see far better long-term results.
In fact, we believe it’s possible for our fund investors’ money-weighted returns to exceed our fund’s own time-weighted performance. It sounds counterintuitive, but it comes down to behaviour and specifically, taking advantage of attractive entry points by investing more during market troughs.
We stay visible and transparent throughout the market cycle, but we also tend to step up and show up for our fund investors during the occasional more difficult times. We explain clearly and in an understandable manner why we’re positioned the way we are, what we’re seeing in the macroeconomic as well as the micro business environments, and provide evidence supporting why we continue to believe in our long-term investment thesis. It’s in these moments that we help all of our fund investors to take an informed broader perspective, and to avoid making potentially reactive mistakes such as selling undervalued quality assets at the worst possible time or abandoning a perfectly sensible long-term investment strategy.
Our communication is regular, consistent, honest, and insightful. Over time it has built a level of trust with our fund investors that lasts beyond any single market cycle. By combining strong long-term performance with meaningful, transparent communication, we do our level best to help our fund investors stick with their investment plan through every part of the cycle.