Value Column von Hans Peter Schupp
19 JULY 2024
Age limit for asset managers?
Hans Peter Schupp, managing partner of Fidecum AG and portfolio manager of the Contrarian Value Euroland Fund (ISIN: LU0370217092) about the „proper age“ of fund managers
“Old vs. young” was the name of a German TV show by RTL that Der Spiegel described as a ‘terminal case of embarrassment’. And the current discussion about ageing politicians, such as US President Joe Biden and his rival for the US presidency Donald Trump, is similar. 81 vs. 79 years. But this is nothing new: Churchill, Hindenburg, Reagan and Roosevelt – all highly revered figures in contemporary history – also showed signs of fatigue, confusion and memory problems during their time in office, or
Politicians, a special species
Are politicians a special species? The Governance Code requires age limits for board members and supervisory board members. There are also legal age limits for certain professions such as notaries, pilots and officers. This even applies to generals, as cognitive abilities and decision-making skills decline over time, which may negatively affect performance. It is bizarre that the general public is protected from age-related poor decisions in these professions, but not in the case of heads of state, whose work has most certainly a higher impact.
High admiration for experienced fund managers like Warren Buffett
But what about asset managers? There is often an admiration for experienced fund managers. The best example is Warren Buffet, who at the age of 93 is the most sought-after active investor. George Soros also handed over to his son at the same age. Similarly, the late investment legends André Kostolany and Charly Munger, who were both still active and highly respected at over 90 years of age.
Wieso ist das so? Es gibt viele wissenschaftliche Untersuchungen zu diesem Thema und nicht überraschend zeigen die meisten, dass jüngere Manager dazu neigen, mehr Risiken einzugehen, was zu höheren Renditen, aber auch zu höherer Volatilität führt. Ältere Manager hingegen verfolgen häufig einen konservativeren Ansatz, was zu stabileren, aber potenziell niedrigeren Renditen führt. Vergleicht man die Renditen risikoadjustiert, so belegen die Studien – wie so oft – sowohl das eine als auch das andere. Wie heißt es in der Morningstar-Untersuchung „Jung vs. Erfahrung“: „Sowohl die Jugend als auch die Erfahrung haben ihre eigenen Stärken und Schwächen. Jüngere Manager sind möglicherweise besser mit den aktuellen Markttrends und technologischen Fortschritten vertraut, während ältere Manager mehr Stabilität und bewährte Strategien bieten können.“ Dass Buffett nach längerem Zögern auch keine Scheu vor neuen Trend hat, zeigt sein Investment in Apple, die – trotz eines Teilverkaufs – immer noch die größte Position in seinem Portfolio ausmacht.
Why is this the case? There is a lot of academic research on this topic and, not surprisingly, most of it shows that younger managers tend to take more risks, which leads to higher returns but also higher volatility. Older managers, on the other hand, often take a more conservative approach, resulting in more stable but potentially lower returns. If we compare the returns on a risk-adjusted basis, the studies – as is so often the case – prove both the one and the other. As the Morningstar study “Young vs. experienced” states: “Both youth and experience have their own strengths and weaknesses. Younger managers may be more familiar with current market trends and technological advances, while older managers can offer more stability and proven strategies.” Buffett’s investment in Apple, which – despite a partial sale – is still the largest position in his portfolio, shows that he is not afraid of new trends after a long period of hesitation.
A proven investment approach for 25 years
So it doesn’t necessarily depend on age to be a good asset manager. Now, at 58 and with more than 30 years of experience as a fund manager, I have certainly seen many things. But, when managing our Contrarian Value Euroland Fund (ISIN: LU0370217092), there is one even more important aspect for us: it is the investment philosophy. In our investment approach, which has been tried and tested for more than 25 years, we look for undervalued companies with comprehensible business potential. In doing so, we invest like an entrepreneur looking for opportunities, even if this means going against the prevailing market trend. And we remain model consistent at any time.
„Rindfleischetikettierungsüberwachungsaufgabenübertragungsgesetz“
(“Beef Labeling Monitoring Task Transfer Act”)
Nevertheless, the question remains: should there also be an age limit for fund managers? My suggestion, which is not necessarily meant seriously: as long as your asset manager can pronounce the really existing German word “Rindetikettierungsüberwachungsaufgabenübertragungsgesetz” without making mistakes, he is fit for the job. Meanwhile, you as an investor can concentrate on other criteria.
Translation for convenience only!
About the author: Hans Peter Schupp is a managing partner of Fidecum AG und the portfolio manager of the Contrarian Value Euroland Fund.
