Human nature

One of the under appreciated aspects of my role is the opportunity to meet and speak with external fund managers. Gaining insight into how different people believe they can make money across styles, asset classes and sectors is interesting not only from the perspective of identifying which managers we should select for our clients, but also at a slightly more conceptual level.

It's great to be able to read a shiny marketing deck but generally, the more important question is whether managers truly understand: what they are actually doing (in the abstract), why their approach works, and why it might be repeatable. In short, what is their edge?

Consider a value manager focused on turnaround situations. In general, they will be looking for companies which are displaying improvements in operating metrics, that are unappreciated by the market, but that will eventually unlock higher share prices. If these companies are also trading on low valuations, there may be additional upside from re‑rating. However, these opportunities often work very quickly, and so a good manager will know that well considered execution of their idea is the best way to generate alpha.

Equally important is ensuring where a manager knows where they should not be active. In this same example, alarm bells would ring if the same value manager began buying supposedly “under‑appreciated turnaround” growth stocks in what we would recognise as “beat the fade” companies, which tend to make their money in a much slower way than this manager would usually make money.

Looking ahead through the rest of 2026, there are several significant events on the horizon, including local elections in the UK in May, and the US mid‑term elections in November. We do not believe we have an edge in predicting these outcomes. As a result, our focus will be on risk management around these events and on taking advantage of any resulting dislocations, rather than positioning portfolios around a specific political view.

Ultimately, the concept of “edge” is central to successful investing, but it is also one that is easy to claim and hard to demonstrate. For advisers, understanding where managers genuinely add value - and where they do not - is crucial when constructing robust portfolios for clients. Equally, being honest about our own strengths and limitations helps avoid taking uncompensated risks. In a world dominated by uncertainty and noise, clarity about edge, discipline in behaviour, and humility about what we cannot know, remain some of the most reliable tools available.