If the Romans can teach us about how to run a pension scheme and Seneca can teach us about the importance of clear goals and objectives, then the man who, I believe, can tell us about Manager Research is an individual by the name of Johan Huizinga. Huizinga, who lived in the Netherlands in the early to mid-twentieth century, was a specialist in European Medieval and Renaissance History, subjects on which he wrote several well-regarded books. However, what’s less well-known is that he also wrote a book, catchily-titled Mensch en menigte in America, on the history of the USA – something of a departure from his main specialism given that he had never previously written anything on America, and had never even visited the country before he took up his pen. The book became successful and influential, a fact which seems to have surprised everyone except Huizinga. When asked how he could possibly have written so perceptively on the USA without ever having been there, his response was simple: I have never been to the Middle Ages either.
It’s worth thinking for a moment about what Huizinga was implying by this response. I may not be an American, I may never have been to America, I may have known nothing about America before I started writing, but I can still write a book on the history of the place. How do I do this? I do it via a disciplined and systematic research process: the same research process that has led to my game-changing work in what most people regard as my ‘core’ specialism. The subject-matter changes, but the research process stays the same.
Holding that thought, let’s move on to Manager Research.
At Redington, the Manager Research Team’s role is to provide our clients with access to the right investment manager at the right time in order to help them achieve their investment goals. Easy to say, but a bit daunting when you think about what it entails. For one thing, there is the problem of scale. To take Europe in isolation, at the last count there were more than 35,000 UCITS funds and 19,000 non-UCITS funds registered, with almost €9 trillion of assets in their care – enough to pay off Greece’s national debt 27 times over. Then there is the problem of categorisation, a possibly less intractable but arguably far more mind-boggling issue. Equity funds, for example, can be divided not only in terms of geography or in terms of target issuer market cap, but also by business sector, ‘trends’ (‘global medical discoveries’, anyone?) or more intangible concepts such as ‘growth’, ‘value’, ‘deep value’, or (my particular favourite), the disconcertingly-named ‘GARP’ (or ‘growth at a reasonable price’). Managers’ endless quest for differentiation from one another in a saturated market ultimately leads to what one of my colleagues has termed the ‘distressed structured illiquid mezzanine sub-debt’ phenomenon. i.e. – My product is so impossibly specialised and bespoke that it is totally unlike anything you have ever come across before, so you’ll have to spend a lot of your time listening to my sales pitch if you want to understand it, I’m afraid.
When faced with this type of situation, I often find it helpful to think of Huizinga in his Dutch study sitting down to write a book on the USA – a subject so vast that it seems initially to defy analysis. How to approach such a huge task? Not for him the time-honoured tradition of consuming a large amount of coffee, working for 16 hours straight and then bursting into tears. No – because Huizinga understood the key skill required of anyone engaged in this kind of research: when faced with one large problem, the best thing to do is to break it down into a series of smaller problems.
I’ll talk about how we set about doing this in my next blog.