Despite signs of recovery, the financial crisis is not to be finite. It remains the opinion of a majority of institutional investors, overall 64 and 59 in Europe, according to the poll conducted recently by FTI Consulting to 153 of them, representative 2.800 billion in assets. Taxed of convenience or even blindness for anticipated the tornado of "subprime" credit, they may now be between excess of mistrust. Rightly, because since the alert of the summer 2007, managers had to deal with confusing and challenging markets.
Cannot cheat with oneself in such circumstances, the famous Warren Buffett statement that it is "when the sea receded known swimming without a bathing suit." "Recessions are times where investment policy is more indicative of the talent of the management professionals", confirm the academics in their work (1).
A paradox, it is in this phase of the economic cycle that managers are also the most efficient. Thus, across the Atlantic, and long-term (1980-2005), operating equity managers reported average and net costs 1 per year to customers in recessions. Conversely, during the phases of expansion, managers are structurally lose money to investors (-0,9 per year).
Errors and strokes of brilliance
This is not what is observed on other less mature markets including in France, where managers are successful in a context of economic growth. The capacity well across all phases of the economic cycle, the less favourable is acquired with the experience.
In the United States, good performance during episodes of contraction in activity are not attributable to a form of Darwinism that would eliminate the poor managers leaving that survive the best. Indeed, in difficult times, investors particularly to their managers not to make too many mistakes instead of making shots of chips to enter the famous fabulous opportunities to them (read below).
Customers want first of all understand what are their providers, the clarity of their investment process arriving at the top of their criteria of selection, followed by a good control of their risks, and then performance (see illustration). The ability of managers to choose "good" values (which will then know their results increase), that their talent to "stock picker", is much better then phases of economic expansion as in recessions. During these years, it is their "market timing" (anticipate the market rebounds and falls) which is more efficient. This is, indeed, that plays a large part of their performance, which may be a stronger focus on the management of their liquidity (cash) in their funds. They must also manage the movements of withdrawals from their clients.
Pride and overconfidence
In this respect, individual investors as individuals appear less rational and vigilant in bull markets as baissiers. Hence less incentive for managers to do their work properly during the phases of general upturn in the markets. Crises would thus appear as of the cures of austerity as jouvence, investors and their returning Manager, brutally, less excessive and more in line with the correct behaviour. Their expectations in terms of performance would become more realistic and less utopian.
The recession reduces pride and flange overconfidence, a deadly poison. Investors have reason to be more vigilant and careful in recessions since the dispersion between the performance of managers is higher in the order of 30 in the United States. It is more difficult to stick to their reference indices, and follow the style of management that is clean, under the effect including the echoes of the markets.
There are still the Pearl rare, i.e. managers skilled in selecting values in the phases of expansion, and adept in "market timing" in recessions. They have certain characteristics: they manage smaller funds than average, and more actively taking bets of conviction on certain values. They are more likely than others to have a degree of "Master of Business Administration MBA. Candidates interested in the more developed "hedge funds" in that they generally perform a second part of career.
Understanding and requirement
Besides these "rare pearls" that make the crisis an opportunity, the vast majority of managers is working it through this troubled by limiting its risk taking. Goal: keep his job and avoid falling in a market of work in the worst possible moment. According to the survey of Invesco, the percentage of European institutional investors who have thanked their managers, mainly for underperformance and lack of control of the risks, in the last two years, rose by 42 to 49 between 2007 and 2008.
"In France, institutional, except the pension reserve fund, are still generally, to separate from their managers before the end of their term and even if the performance are not at all meet. "This sends very positive messages to the rest of the industry", said a consultant. The fact France also part of the countries in Europe terminating least their managers, behind much less tolerant Scandinavia with gaps in its providers. Violence and suddenness of the crisis have also, to some extent and limits, make more empathetic and less demanding clients for their companies.