A Passion for Performance - Investing and Cycling

Cycling?and investing have a lot in common - you have got to try and put the odds in your favour and implement and execute a clearly defined strategy?(and don't deviate from it)?to achieve the long-term goal.

On Saturday, the Tour de France begins in Bilbao (it often starts in countries outside of France).?As usual, there are 21 stages in the Tour and this year the total distance cycled will be over 3,400 kms.?

Since 1919, the cumulative race leader has been awarded the Yellow Jersey after each stage.??The Yellow Jersey?was initially introduced to help bystanders identify the overall leader of the race (of course, today on Eurosport we have the legendary King?Kelly and Derry Girl Orla Chennaoui on commentary to keep us updated).?

Did you know??There have been 8 winners of the Tour de France that have never won a stage during the Tour (the most recent being Egan Bernal in 2019).?In the investment world, this is also very significant.?A fund does not have to be "top of the table" each quarter to produce the best long-term performance.?The performance of funds is often determined by conditions in the markets, and it is very difficult to select a fund that can be the top performer in all market conditions.?Likewise, it is impossible?for a rider?to win every stage of the Tour de France given the different profiles (flat stages, hilly stages, mountain stages and time trials).

For a cyclist to win the Tour de France, he typically will have to be excellent at one type of?riding (e.g. in the mountain stages) but also be?strong in the other stage types AND have a strong team around to provide support (the domestiques or servants?that ride back to the team cars and collect the food and water bottles for the team leader).?I should also add that there is a necessity for a bit of "good luck" required as well.

Likewise, when selecting an investment fund,?investors should appreciate that there is not one fund that will outperform in all market conditions.?However, investors should look for managers that have a?clear investment process that can deliver in most market conditions and have a strong investment team to implement that strategy.

Small Margins.?Last year, Jonas Vinegaard from Team Jumbo Visma won the Tour de France and Tadej Pogacar (who won in 2020 and 2021) came second – 2 mins and 43 seconds behind.?Sounds like a decent “winning margin”??Well, perhaps we need to put it in context, the total riding time (over the 21 days last year) was 79 hours, 33 min and 20 seconds (or 4,774 mins).?So Pogacar was “just” 0.0006% behind the winner.?

When selecting an investment fund, advisors should examine how the fund manager performs when compared to peers over longer periods of time and not just over the short term (like the 21 days of the Tour de France!!!).?Pogacar is still one of the greatest cyclists in the world despite being second over one race last year.

One Attack Won the Race.?After 79 odd hours of racing last year, Pogacar lost by 2 mins and 43 seconds to Jonas Vinegaard.?This time loss all occurred on one day (during Stage 11).?On this Stage, Jonas attacked on the Col du Granon (an 11km climb with an average gradient of 9%).?Pogacar “missed” the attack and could not recover.?At the end of that particular day, Jonas had established a lead of almost 3 minutes which he maintained all the way to Stage 21 on the Champs Elysees.

So missing “one attack” effectively lost the Tour de France for Pogacar.?Likewise, investors should not try and time the market.?Missing a few of the “best days” in the market can adversely impact longer term returns.?Advisors should try and identify funds that can perform in most market conditions whilst enabling investors to “sleep easy at night”.

In 2022, Jonas Vinegaard won the Tour for Team Jumbo Visma.?However, that was not the team plan before the race began. ?A team at the Tour comprises of 8 cyclists.?There is typically a General Classification rider (with the aim to win the Yellow jersey) and then the support riders around him (called domestiques).?Last year, Jumbo Visma, which is one of the richest and strongest teams, started the Tour with Roglic as its “preferred” GC rider.?However, Roglic crashed badly on Stage 5 (into a bale of hay on a traffic island!!!) and eventually had to withdraw from the Tour.?

Jumbo Visma, which had meticulously planned for the Tour for 12 months, and suddenly the best laid plans and hard training were blown apart up by a bale of hay (costing c€3)!!!?But, like any good team, they re-evaluated the situation, gathered all the available data and began to plan how they could still win the Tour with a new General Classification rider (Jonas Vinegaard).

Similar to investing, “bad things” WILL HAPPEN.?But what advisors should look out for are investment funds that can assess the situation and plan an appropriate measured response.?In other words – BE ACTIVE.

Like the Tour de France, investing is all about endurance, and the winner typically is the one that identifies a fund manager with a strong investment strategy, that stays invested but can also remain ACTIVE to changing circumstances.

Who will win the Tour in 2023??The strong outright favourites for the race this year are Vinegaard and Pogacar again (out of 176 riders!!).?There is no doubt that Vinegaard has the best team given the size and financial resources of Team Jumbo Visma.?Whilst Pogacar has a much smaller team, he has a real passion and flair to deliver (as he did so against the significantly larger teams in 2020 and 2021).?Similar to selecting an investment manager, often the smaller investment boutiques with a “Passion to Perform” can outclass the larger global players.?

Picking the winner of?the Tour de France?is?a massive challenge, but if you're looking for an investment manager that has consistently delivered during different “Stages” of the investment cycle, then drop me an e mail - there is one that I strongly recommend !!

James Forbes

June 2023