Is AI a bubble?
This article first appeared in Money Marketing on 15 December 2023 Nvidia is one of a handful of ...
Preparation is key when it comes to a boxing match. Whether it is achieved by using advanced facilities and training equipment, or by going ‘back to basics’ and chopping wood or pounding meat carcasses, getting physically and mentally ready is paramount. Boxers need to know their own strengths and weaknesses as much as they need to know those of the opposition.
We look at how some of the lessons learned in (and out) of the boxing ring, can also apply to the world of investing.
Joshua’s initial opponent, Kubrat Pulev, withdrew from the fight with a shoulder injury. Having trained to box a specific opponent, Joshua found himself suddenly preparing to meet a different fighter – with more experience and four inches less height than he had planned. Time was not on Joshua’s side, but his meticulous training regime stood him in good stead.
Trying to second guess central bankers, politicians and the direction of stock markets is difficult, if not impossible. It’s why most fund managers say they are ‘bottom-up’ and not ‘top down’: they will be cognisant of what is going on in the wider economy and world but they will concentrate instead on finding a good company. There are two Elite Rated funds in particular, whose managers spend a lot of time analysing how different stocks could behave in different scenarios:
In this particular bout, the stage was set well before the fight itself. Two years prior, when the pair first met in the ring, Shmeling had studied videos of Louis’s technique, and used a weakness he saw to win via a surprise knockout. This time, however, Louis came out better prepared and the fight last just 124 seconds, as he reclaimed his title.
This was a widely anticipated bout, firstly because McGregor enticed Mayweather out of retirement, but also because this was McGregor’s first ever professional boxing match. Could he successfully transfer his skills from the cage of the Ultimate Fighting Championship arena to the boxing ring? In this case, it would appear not. The rookie did well, lasting ten rounds, but was outclassed in the end. It remains to be seen if he will try again.
Fund managers, like us all, change jobs from time to time. But there are always questions as to whether they will be able to repeat their success at another company, and it is something we talk to them about in detail at meetings.
Underdog Douglas pulled off one of the greatest upsets in boxing history by knocking out the then undefeated, undisputed heavyweight champion Mike Tyson in Tokyo. It wasn’t just a lucky punch; Douglas had prepared well and was in the best fighting-shape of his life, taking everything Tyson threw at him and handing it straight back. Unfortunately his time at the top was brief and within a year he was totally out of shape and was knocked out in the third round of his first title defence fight. He retired shortly after. In contrast, Muhammad Ali’s boxing record was incredible. Over a period of almost two decades he had 56 wins, 5 losses and 37 knock-outs to his name.
Of course, this consistency of fund manager skill is at the very heart of the Elite Rating process. Our proprietary quantitative screening tool, AlphaQuest strips out the impact of market movements to identify the returns attributable to manager skill and then estimates how likely a manager is to continue to deliver superior returns in the future. It uses weekly data over 10 years (or the life of the fund or tenure of a manager if shorter) to see how consistent this skill actually is – effectively eliminating the simply ‘lucky’ for those with real and repeatable talent.