Last month marked 15 years since I started Fortress. It was April 2007; I was 30 and married with 4 young children between ages 3 and 8. It was just before the GFC hit and the Australian share market would fall from November 2007 until February 2009 by 56%. To say it was a challenge is an understatement. Over the years there have been several crises to contend with. That doesn’t change, as I have said before - there will always be another crisis. But that’s the thing about investment markets, if it was easy everyone would do it. You learn far more as an investor and fund manager in a bad market than you do in the good times.
Personally, I prefer it when there is a crisis as it makes the work more interesting. Don’t get me wrong, I’m not sitting here hoping for some sort of disaster but there’s nothing quite like a global crisis to make you lock in and focus, it’s a new puzzle to solve. That’s not for everyone. Believe it or not, it is actually more difficult to win new clients when markets are good because every fund manager and adviser looks like a genius. All clients are generally happy. It’s when everything turns to mud that sorts the wheat from the chaff. We are starting to see the fallout from that now as markets have pulled back.
Unfortunately, it is not uncommon in the investment industry for business models to evolve that are lucrative for the institutions more so than the clients. Big fees for the least amount of work go unquestioned in the good times when the rising tide raises all boats. Set and forget strategies and quoting Warren Buffett a couple of times will do the job. But the reality is that just leads to complacency on all sides. The investment industry gets lazy, and the clients go along with it because the returns look okay. But what happens is that the complacency leads to passive and generic portfolios and perhaps most dangerously, a much higher level of risk built into investors’ portfolios than they should ever have had.
I recall back in the GFC and our early days that our portfolios were down only about 15% at a time when most portfolios had more than halved. We held a lot of cash, and it was a great outcome for clients. But no one thanks you when you lose them money even if it could have been far worse. But what I also learned back then was that people do notice how you respond in a crisis. How you operate under pressure. Do you step up or do you step back? I personally think that’s the ultimate measure of an individual’s character, how you respond under fire. Thinking independently about the world, economy, and markets to form a view is a critically important part of that. So is communicating that view and the rationale behind it.
As far as the other big lessons I’ve learned in business along the way, there are many. Taking a long-term view in terms of both investment time horizon and in terms of the way technology continues to change the world. But also, taking a long-term view in terms of building the business. But I think the best and most important lessons I’ve learned have been about myself. I think one of the most underrated aspects of performing at a high level come back to developing good habits. That covers discipline, routine, and consistency. I find I am more patient as I get older. I love the investment process and the intellectual challenge of working out what’s going to happen before others do.
I have gained an appreciation for why the great investors such as Warren Buffett, Charlie Munger and George Soros are all doing this into their 90’s. I’m sure the money is a great motivator, but they fall in love with the challenge and the process. The ever-changing world provides you with an endless puzzle to constantly figure out. Every day presents something new and interesting. Like them, I don’t see myself ever retiring because I want to do this for the rest of my life.
The business has evolved over time in terms of services and size of clients. When I first started, we managed investment portfolios but also did financial planning. One of the best decisions I’ve made for the business was to only focus on the part that I loved, managing investment portfolios. Now we have few clients and manage much bigger portfolios. But more importantly every day I’m spending my time doing what I love to do. It’s better for the business, it’s better for me and it’s better for our clients. Our first 15 years in business have been a great success, but the way I see it we are still a young business. I can’t wait to see how we grow and develop in the many decades ahead.
General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.