Meeting Graham Tucker, Portfolio Manager at Old Mutual Investment Group’s MacroSolutions boutique

  • Q: How did you get involved in financial services - was it always something you wanted to do?
  • A: As I studied actuarial science, I knew that figures and finance were definitely going to feature in my future but the investment arena didn’t actually crop up as a realistic career path in my formative years. Then, near the end of my degree I was offered the opportunity to work on a project at Old Mutual Asset Managers (now Old Mutual Investment Group) for a month. While completing the project the bug bit me and it became crystal clear that my path lay in investments. From that point I worked hard to develop my skills in this direction.

  • Q: How much of a successful investment is down to skill and how much is luck?
  • A: The beauty of the industry is that there isn’t one clear formula for success. Many investment managers from diverse backgrounds and with various skill sets have succeeded. What is a constant is that, in order to have longevity in the industry, it is vital to have a solid investment philosophy and a repeatable process. This doesn’t mean that you will outperform over every time period, but it should lead to superior results over the long term, which is the true test of skill. That said, luck does play a role, but I feel it diminishes as a driver of success with time. An analogy I came across some time ago is that you may be able to beat Tiger Woods in one round of golf, but to beat him over four consecutive rounds is far more difficult, if not impossible, for the average golfer. In other words, luck can only take you so far, skill is what truly counts.

  • Q: What in your view is risk and how should investors consider risk?
  • A: It’s very easy to throw numbers about when it comes to risk – usually if you can quantify something it becomes easier to understand. But numbers, especially summary statistics such as risk numbers, can be dangerous. The usual risk statistics that are bandied about allow for risk measurement, but they do not help you to understand risk. Importantly, there are many types of risk when it comes to investing, so it is important to start with how a particular manager defines risk. Risk, as defined by MacroSolutions, is the chance of not delivering to our clients’ expectations. With this in mind, knowing what you are trying to achieve and how long you have to get there are the key variables. If it’s likely you will need to disinvest within a short period, then it will be risky to invest in portfolios that aim to deliver the greatest long-term real returns (typically high equity investments). The longer your time horizon, the more you should be prepared to tolerate the possibility of short-term capital losses inherent in equity-type investments. But there is no escape from risk and investing in low volatility assets (like the money market) for a long time creates a different type of risk i.e. the risk of not achieving real returns on your savings. This is especially true in the current low interest rate, high inflation that characterises the SA economy. In fact, to me, erosion by inflation is a bigger risk than incurring a few short-term negative periods in a diversified portfolio that is invested for the long term.

  • Q: What has been your best investment experience and what was your worst investment experience?
  • A: While there have been many great experiences over the last 14 years, the best relates to the launch of a new fund, Edge28, in 2011. This fund was launched following the amendments to Regulation 28 of the Pension Funds Act. It has grown to over R 1bn in its short life and has delivered great returns to our clients. One of the most exciting aspects of this fund, for me, has been the exposure that I’ve gained to the worlds of private equity and hedge funds, both of which comprise sizeable portions of this fund. The global financial crisis in 2008 stands out as my worst experience. But, while it was a difficult time for investors, it gave me the chance to learn a lot about myself, my colleagues and our clients. When everything is going well, it’s easy to become complacent. It’s when the tide turns that your philosophy, process and team dynamic are really put to the test.

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