Dear Fintax Investor,

Please find below the link to the Q4 2019 Fintax Funds manager commentary, provided by the MGIM advisory team.

Commentary: Spectacular in the Vernacular

It is often when things are done differently to the norm that spectacular results are achieved.

Take Picasso.

The artist whose full name was Pablo Diego José Francisco de Paula Juan Nepomuceno María de los Remedios Cipriano de la Santísima Trinidad Martyr Patricio Clito Ruíz y Picasso, was born in Spain and went on to become one of the most unconventional and spectacular painters of all time.

When he was 15, he was accepted at the Royal Academy of San Fernando where he was taught classical subjects and techniques. He wrote to a friend: ‘’They just go on about the same old stuff…” Here he painted a self-portrait which was good, but was done in the fashion of his contemporaries. From a contemporary start early in his life, you can see how his talent and independent thinking developed throughout the years. The key was him shunning contemporary painting and replacing it with his originality. The results are spectacular as the below paintings show.

Average investors can be compared to Pablo Picasso’s painting when he was 15 years old. On average, most casual observers of the painting will say it is good, but not spectacular.

Average investors take investment positions that are very similar, almost identical, to what everyone else is investing in i.e the market. In the latest market cycle, which is delivering strong performance, you’ll often hear these investors talk about their investments in large, well-known companies like Netflix or Amazon that form a large part of the global index. The performance of the funds run by these investors, therefore, tend to mimic those of an index, underperforming slightly due to fund manager fees, but never deviating by too much. In essence, guaranteeing average performance. A rising tide tends to lift all ships.

Good quality investment managers follow a different trajectory in pursuit of spectacular outperformance. Their investment insight evolves over time. The way they view an investment position can be different to what the market’s views may be at a point in time. Therein lies the crux. If a company is temporarily undervalued by the market, good quality investors buy. When the average investor (the market) comes to their senses and starts buying, driving up asset prices, good quality investors sell. 

By thinking independently and investing differently to those of the average investor, good quality investment managers can achieve spectacular performance in excess of indices and net of fees. 

The Fintax Funds consist of investment managers that shun being average. They take independent views from the market. This allows them to generate risk-adjusted returns in excess of what the market is able to deliver. 

As always, we welcome any questions, comments or queries you may have.