Industry Voice: Key elements of success are admitting to errors, sharing information and asking the right questions. After 10 years at the helm of the UK Equity Income Fund, Chris Murphy shares his lessons learned.
No-one ever learns from getting it right first time. In his book ‘Black Box Thinking' Matthew Syed demonstrated there are recurrent themes and trends that explain why projects succeed or fail.
Key elements of success are admitting to errors, sharing information and being open. Asking the right questions is key: In the second world war, the airforce looked at where they were seeing damage in returning planes. They decided to reinforce those areas. However, it made no difference. They asked the wrong question. They missed a crucial bias. They should have asked about the planes that weren't coming back, not just the ones that ‘survived'. When they looked more closely and factored this analysis in, more planes returned.
Asking the right question is vitally important in fund management. And after ten years at the helm of our equity income fund, I thought it an opportune time to reflect. Matthew Syed's framework provides a neat analytic lens from which to draw conclusions. For while fund management is not as directly link to mortality risk as, say, aviation, we are responsible for people's livelihoods, by stewarding their retirement and saving assets.
History is littered with examples of this. The pools, for example, used to be the way that families bet on the football. The Littlewoods pools had the opportunity to bid for and run the National Lottery, but it felt its brand was so powerful, it didn't need it. Almost no one has heard of it today. This is not uncommon and also happened to, for example, Xerox, Kodak and Nokia.
The pace of change and disruption is accelerating. M&S has failed to understand consumer trends for some time. It may be able to turn this around, but it is not going to be easy. Next has been a great business, but anyone with a retail footprint has struggled. What happens when there is a recession?
As fund managers, we always ask whether we are set up for things to go wrong. Is the fund inappropriately balanced for difficult periods? Or is it exposed to over-leveraged business?
Webinar: Ten years of a no-nonsense approach - register today for Friday, 17 May, 2019. Chris Murphy will discuss the lessons learned over his ten-year tenure managing the Aviva Investors UK Equity Income Fund and why he believes there is still value to be found in the UK.
Key risk
The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.
Important information
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL) as at 02 April 2019 Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.
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