Investments  

We are much less in control than we think we are

As investors increasingly focus on fund fees and value for money, the debate as to whether active fund management is more luck than skill is as hot now as it has ever been.

And while Jacob de Tusch-Lec, manager of the highly successful £337.8m Artemis Global Income fund, would naturally argue that the key to consistent outperformance is the result of his skill as a manager, his life has certainly benefited from a bit of luck.

At 26, the loan-laden New York University business school student was spending his days applying for every internship available for the months between his first and second year – pivotal for finding a job after graduation.

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With the rapidly deflating tech bubble nearly wiping out the internship options in New York, Mr de Tusch-Lec turned his attention to London.

But on the day he was accepted onto an internship at Merrill Lynch in London, hijacked aeroplanes crashed into the World Trade Center in New York. It was September 11, 2001.

Among the casualties were numerous fellow students of his at NYU, which was the closest business school to the attacks. Mr de Tusch-Lec described how the city had a “weird atmosphere” in the year following the attacks.

Another fallout from the tragedy was that what few internship openings were left were scrapped. Merrill Lynch’s New York office was lost in the Twin Towers disaster. However, Mr de Tusch-Lec’s decision to apply in London meant he retained his internship that, a year later, led to a permanent job offer.

Luck certainly had a role in Mr de Tusch-Lec’s early years in finance.

At Merrill Lynch, Mr de Tusch-Lec worked as a macro analyst and met two fellow analysts with a passion for quantitative asset management. They were Philip Wolstencroft and Peter Saacke and in 2005 he joined them at Artemis Fund Managers to help work on its quantitative range of funds under the ‘SmartGarp’ system.

His experience on the SmartGarp funds, which uses a quantitative platform set up to remove the mistakes introduced by the biases of human managers, played a crucial role in the way Mr de Tusch-Lec set up and manages his current fund, the Artemis Global Income fund.

He still maintains that the quantitative system “works most of the time” but it suffered spectacularly during the financial crisis, losing significantly more money than the overall market.

“What that has taught me, [through] the struggles we had with quant back then, was not so much that quant does not work but the importance of being flexible and opportunistic,” he says.

However, his grounding in the quantitative system has been a huge influence on how he views the market.

He explains: “Quant is great because the machine tells you what to do. That is the attraction about it, because we all know in the end we are just small monkeys and we all know the studies that say when we are hungry and blood sugar is low we don’t make great decisions or that dopamine gets released when we see green on the screen and we want to buy.”