It is so important not to let your mistakes haunt or define you,” says Janus Henderson Investment’s director of European equities John Bennett. “And, like in life, avoid repeating them.”
In this series Portfolio Adviser asks long-standing figures in industry about the biggest lessons that have shaped their careers. For Bennett, it was when he made a binary call about the direction the market was headed in.
Don’t fight the Fed
In 1998, markets were experiencing simultaneous crises: US hedge fund Long-Term Capital Management had to be bailed out; the value of the rouble had plummeted and the Russian Central Bank defaulted; and the financial crisis in Asia was in its second year.
At the time, Bennett was “in the long-only world, where you are measured against a fully invested index at all times and I went to 28% cash, and with the invested bit I went defensive”.
Enter Federal Reserve chairman Alan Greenspan stage left, who proceeded to “turn on the taps” and the mantra of the day became ‘don’t fight the Fed’.
“By making that big swingeing call, of going 28% liquid and the rest defensive, I’m all one side of the boat. And when you’re all one side of the boat, you risk capsizing. You have made a binary bet on the market.
“Don’t be a binary manager who needs something to happen or not happen. In my case, I had needed the market to continue to go down to look good versus an index. And it didn’t.”
He adds: “And where this is really apposite, not just in terms of my own career, is where I see it playing out in the market right now. You’ve got a generation of fund managers who have never seen the price of money move up. And that has now happened. The genie is out of the bottle, and the genie is called inflation.”
‘Don’t let your mistakes haunt you’
Bennett has been a value investor for most of his career, but he considers himself to be more agnostic now. Where he sees echoes of his 1998 lesson, however, is with growth managers who have benefited from falling interest rates and the disinflationary environment but “continue to defend being in growth stocks” despite the drastically altered market backdrop.
“Investing is not a religion,” he says. “As soon as you start to believe you are any good, the market will come for you.”
Bennett makes no bones about having made missteps during his career, but he stresses that there is “a huge difference between being defined by something and being shaped by it”.
“You’re shaped by a series of experiences and a series of mistakes. The trick is to try and make your mistakes smaller than your successes. Which is easier said than done.”
Bennett first got a taste for stockpicking at the age of 16 at school in Glasgow. His class won a national competition sponsored by the Royal Bank of Scotland called Capitaliser, which involved buying and selling shares. A couple of years later, while working at the Clydesdale Bank, he entered the Investor of the Year competition run by The Observer, in which he finished runner-up.
His fascination with stockpicking has not waned even after more than three decades in industry, and Bennett has no plans to retire any time soon. After flyfishing, he describes markets as his “biggest addiction”.
“I love European equities, I love markets. I think we’re at a major moment in markets as we speak, a major moment.”
john Bennett is director of European equities at Janus Henderson Investors and portfolio manager on the Janus Henderson Continental European and Pan-European long-only and long/short strategies.
Bennett has held these roles since 2011 when his previous company, Gartmore, was acquired by Henderson. Prior to Gartmore, he served as fund manager at Global Asset Management for 17 years.
This article first appeared in the October edition of Portfolio Adviser Magazine