Terry Smith has been in the news recently. Firstly, the news that he was paid £36m for one year and secondly, he blames central banks for his fund’s poor performance.
In the melee of fund managers, Terry Smith has built himself a reputation for outperformance. Compared to many other fund managers, he has clearly outperformed them. So are they not pathetic? Why aren’t they all as good as Terry Smith?
Imagine if there were 100 fund managers you could choose between (in reality 100 is scratching the surface). Out of 100, all the managers are bright intelligent people, and must therefore stand equal chances of outperforming. So why aren’t 100 fund managers outperforming? How do you identify the next Terry Smith? (If you know, let me know!)
If you are a Terry Smith follower, would you put all your money into his funds? That may take some guts. After all, what if things go sour?
It’s more likely you’ll use a wealth manager. They will never recommend you invest all your money into Terry Smith. Why? They will talk about diversification. Of course, the question remains that if they did suggest you invest all your money with Terry Smith, you wouldn’t need their portfolio services. Clearly, that’s not going to happen! By diversifying you are hoping to catch the next Terry Smith.
And so we are back full circle. How do you identify the next Terry Smith?
However bright and intelligent fund managers maybe, some will never emulate Terry Smith and it could be argued are a little pathetic.
Apologies to any fund manager friends whose feelings I may have hurt…