The stock market wisdom of Roger Federer

Wimbledon 2025 is underway. Cue rain, strawberries and the plucky underdog Brit coming unstuck in the fourth round. It’s an unlikely source of stock market wisdom, but in 2024, multi-year Wimbledon champion Roger Federer made a speech, which showed that the parallels between tennis and financial markets may be closer than you think. 

Federer made the commencement address at Dartmouth College in the US, having been presented with an honorary degree. Sportspeople have an erratic record on imparting wisdom to business people, but Federer nailed some home truths that could apply neatly to the fund management sector. 

His most memorable line is that perfection is impossible. He points out: “In the 1,526 singles matches I played in my career, I won almost 80% of those matches… Now, I have a question for all of you… what percentage of the POINTS do you think I won in those matches? Only 54%. In other words, even top-ranked tennis players win barely more than half of the points they play.”

Fund managers show similar performance statistics. A study of fund manager performance by Essentia Analytics assessed fund managers on seven key metrics – stock picking, entry timing, sizing, scaling in, size adjusting, scaling out and exit timing. It found that the best fund manager – the Roger Federer of the business – only got those decisions right 55% of the time*. 

However, the survey also showed that 82% of managers had ‘positive payoffs’, meaning their good decisions contributed more to good performance than the negative impact of their bad decisions*. In other words, you have to win the right points at the right time, and make sure your mistakes aren’t catastrophic. It is certainly true that some of the top performing global funds, such as Ranmore Global Equity or Orbis Global Balanced, have succeeded by minimising losses in difficult market conditions, beating those that have simply targeted the fastest growing stocks. 

Federer agrees on the importance of consistency: “Everybody can play well the first two hours. You’re fit, you’re fast, you’re clear… and after two hours, your legs get wobbly, your mind starts wandering, and your discipline starts to fade.” He may be talking about the pressure of a tennis match, but volatile markets can have a similarly deranging effect. Fund managers who hold their nerve through difficult markets and stick to their process when the going gets tough, have generally delivered better returns for investors. 

We looked at which of our Elite Rated funds could boast this level of consistency – the equivalent of winning 54% of the points to win 80% of the matches. 29 funds with a 10-year track record had no underperformance of their stated benchmark over that period, or just a single year, while a further 68 funds had two years. That means 97 funds hitting Federer’s 80% target**. 

There were six funds that hadn’t had a single year of underperformance. That is an astonishing statistic. The past decade has seen markets flip flop between value and growth. US growth companies were in favour for a lot of the time, but 2022 saw an abrupt rise in interest rates and the market environment changed. To have outperformed on both sides is no mean feat. So hats off to Fidelity Asian Dividend, Fidelity Global Dividend, Guinness Global Equity Income, JOHCM Global Opportunities, Polar Capital Biotechnology and Polar Capital Healthcare Opportunities. 

For most funds, their difficult year was 2022. This was undoubtedly an unusual year, with interest rates rising at their fastest pace in history. For 16 of the 23 funds with a single year of underperformance, this was their tricky year**. It was particularly difficult for growth-focused funds such as the Allianz Technology Trust, the Scottish Mortgage Investment Trust and WS Gresham House UK Micro Cap, which all saw significant drawdowns. However, all of them have recovered and thrived, and have not let their process slip in the face of tougher markets. 

2018 was the other vulnerable year. This wrong-footed a number of funds with otherwise impeccable track records, including JPM Global Equity Income and Liontrust European Dynamic. However, the mark of a great fund manager is that they learn from their mistakes. It is notable that neither fund underperformed during 2022. In his speech, Federer made it clear that his loss to Raphael Nadal in the 2008 Wimbledon final still rankles: but he learned from the mistakes he made and evolved his strategy, going on to win Wimbledon in 2009, 2012 and 2017. 

Markets can be unpredictable and the environment can change. Investors will value some factors – high growth or income or balance sheet strength – at different points in the cycle. But good managers can thrive in a range of market environments. For example, much of the last decade has favoured higher growth stocks, yet there are plenty of value managers who have delivered outperformance over that period. It has been a horrible time for investors in the UK, but good managers have still eked out strong returns. 

On the Roger Federer benchmark, we believe our Elite Rated funds stand up pretty well, with many managers delivering when it matters and maintaining consistency in the eye of the storm. The final word goes to the sage of Centre Court, Federer: “You want to become a master at overcoming hard moments. That to me is the sign of a champion. The best in the world are not the best because they win every point… It’s because they know they’ll lose… again and again… and have learned how to deal with it.”

*Source: Essentia Behavioural Alpha Benchmark, 2022

**Source: FE Analytics, discrete calendar performance 2014 to 2024