Warren Buffet talks about eschewing activity and sticking with the big, 'easy' decisions. Longstanding clients will know our view is similar.
We make no claim to call markets and focus on the big picture; getting a sensible blend of assets (shares, property, bonds) across the globe built around a core of low-cost trackers and augmented by smaller doses of high conviction active managers. And then having a predisposition towards patience and holding your nerve.
It sounds easy but takes some discipline not to act, and overreact, when everyone wants you to. Indeed, sometimes clients may be placated by activity whereas doing nothing is the sensible option.
But there is always the exception that proves the rule. Justin did a good job convincing us to exit Woodford early. With hindsight that may look like an easy decision, but it wasn’t. It was a coldly pragmatic decision that set aside Neil Woodford’s outstanding history and just looked at the current facts. And last week was another good example of how focussing on the big decisions leaves us free to act decisively when we need to.
Over the course of the last few months we have been recommending clients who hold Aberdeen UK Property switch to global property shares to further diversify. It was a job to do, but not urgent.
Or, at least, not until last week when M&G announced they were suspending dealing in their UK property fund. It is not a fund we hold, but it did create the very real risk of contagion – would investors then go looking for cash from the next property fund in line. Long term we are ok with this. We all know property is ultimately illiquid so, whist not ideal, nor does an established property fund suspending cause us any great fear. However, having decided to recommend clients sell the Aberdeen fund we didn’t want to then find out it had suspended, and we had missed the boat.
Justin and I discussed it immediately. Justin’s initial response was guilt that we hadn’t seen this sooner – and that tells you more about him than it does about any failure on our part. We then talked about how quickly we could act and the danger of the fund suspending after we had given the advice but before we were able to act. And how we would deal with the fallout of that? Would we have whipped up panic amongst our clients only to add to it if they then found we couldn’t act.
Having talked in circles we fell back to our usual philosophy. What is the right thing to do? That made it easy - try and get everyone out. So that evening we wrote to 50 clients. By morning we had 40 emails saying please proceed and we called the other 10 clients who all also said yes immediately. We placed all the sale trades by 11am that morning.
We were delighted on plenty of levels. The fact we could act so quickly, that our clients placed so much trust in us, that nobody panicked, and everyone reacted in exactly the right way.
But back to my point. Most things don’t matter that much and high activity can be a smokescreen for something else – often high fees in our industry. We eschew activity for the sake of it because that is the right thing to do. Focussing on the big decisions leaves us free to act quickly and decisively when we think we need to.