After 12 years of investing, here are the lessons I have learnt: A guide for Fund Managers.

Fund management is both an art and a science. At its core, it’s about making informed decisions in a world of uncertainty. But whether you’re managing billions or investing your savings, one truth is universal: markets don’t forgive carelessness. As we enter 2025, I always like to revisit the fundamentals that every fund manager and investor should internalise to navigate an increasingly volatile landscape.

1. Understand Your Investors

It’s tempting to focus exclusively on performance, but investing is as much about managing relationships as it is about managing money. Do you know your investors’ goals, risk tolerance, and expectations? A survey by Ernst & Young (EY) found that 51% of institutional investors prioritise alignment with their long-term objectives over short-term returns. Misaligned expectations are the easiest way to erode trust.

Good communication isn’t optional - it’s strategic. Treat quarterly updates as an opportunity to share insights, not just numbers. This isn’t just about retaining investors; it’s about building partners who will stick with you through market cycles.

2. Diversification Has Worked, and It Will Keep Working

The adage “don’t put all your eggs in one basket” isn’t just good advice - it’s the backbone of sound portfolio management. Vanguard’s research shows that diversified portfolios historically outperform concentrated ones during periods of volatility. For instance, during the 2008 financial crisis, portfolios diversified across asset classes lost an average of 20%, while single-asset portfolios fell by more than 40%.

But diversification isn’t static. Regularly assess your exposure to ensure you’re not simply diluting risk but spreading it intelligently.

3. Diversify Your Thinking, Too

While portfolio diversification gets most of the attention, cognitive diversification is just as critical. Surround yourself with people who challenge your assumptions. Investors who embrace diverse viewpoints are better positioned to spot opportunities and avoid blind spots. As Howard Marks aptly said, “You can’t do the same things others do and expect to outperform.”

4. Markets Are Inefficient (Despite What Economists Say)

The Efficient Market Hypothesis (EMH) is a useful framework, but let’s be honest: markets are often irrational. Herd mentality, cognitive biases, and geopolitical shocks create inefficiencies that skilled investors can exploit.

For instance, in 2022, energy stocks soared by 60% while tech stocks plummeted. Yet, many portfolios were overexposed to tech because managers failed to anticipate the shift. Respect the inefficiencies - they’re where opportunities lie.

5. Respect Risk, Embrace Uncertainty

Risk isn’t just about losing money; it’s about misunderstanding probabilities. In the words of Warren Buffett, “Risk comes from not knowing what you’re doing.” Respecting risk means acknowledging that uncertainty is unavoidable.

The best investors aren’t the ones who avoid risk but those who manage it well. Monte Carlo simulations, scenario planning, and stress tests are tools, but they’re no substitute for judgment and humility.

6. Lifelong Learning Is Non-Negotiable

Markets evolve. What worked yesterday might fail tomorrow. In 2023, artificial intelligence stocks like NVIDIA delivered 200% returns, but not every investor capitalized on the trend. Why? Many didn’t understand the underlying technology or its applications.

Continuous learning keeps you ahead. Whether it’s understanding blockchain, climate risk, or geopolitical trends, knowledge is your most valuable asset.

The Bottom Line

Fund management isn’t about predicting the future; it’s about preparing for it. Understand your investors, respect the markets, and embrace the complexities of risk and uncertainty. Diversify - your portfolio, your thinking, and your skill set.

As fund managers and investors, our goal isn’t just to beat the market. It’s to build a sustainable framework for growth in an unpredictable world. In investing, as in life, those who respect the process are the ones who thrive.