While we wouldn’t recommend you let any of this year’s contestants near your money – can any of the same skills needed to pick a winning Eurovision entry be applied to your portfolio?
The era of the ‘star’ fund manager may be over, but there is no doubt that you need a good frontman or woman. Investment management groups will often boast about the strength of their analyst teams, and while this is undoubtedly a clear advantage, the buck stops with the fund manager.
It is their skill and judgment that determines what goes in and what stays out, and therefore the long-term performance of any investment.
Richard Woolnough, manager of the M&G Corporate Bond and Strategic Bond funds, and Nemo (2024 Eurovision winner) may have very little else in common, but they both know how to bring a team together to great effect.
Nemo had a team of three songwriters on his winning song ‘The Code’. M&G has a team of capable analysts feeding information on individual companies, on macroeconomic factors, on market movements, but it is the top guy that brings it all together and makes it work.
How life insurance can benefit your health and wellbeing over the decades
Post Views:
Sponsored by Post Office
The different types of winner
The BBC has identified two main types of winning songs at Eurovision. One is the “Euro-banger” – “high-energy, 120+ BPM songs with kick drums and synth-heavy production, like Sweden’s winning entries ‘Euphoria’ (Loreen, 2012) and ‘Heroes’ (Måns Zelmerlöw, 2015)”. The other is the slow-burning ballad, such as the Netherlands’ ‘Arcade’ (Duncan Laurence, 2019).
This neatly illustrates the various approaches to investment. You can try for all-out growth, which will come with plenty of risk, but may deliver a ‘banging’ result over the long term.
This may suit those who are just starting out in investment and have a long time to ride out the highs and lows. This might be a fund like the FSSA Greater China Growth Fund. China is growing quickly, but there will undoubtedly be bumps along the way. A lower-octane option might be the T. Rowe Price Asian Opportunities Equity Fund.
The investment equivalent of the ballad would be a nice soothing multi-asset fund that doesn’t experience significant ups and downs. This might be a fund like Jupiter Merlin Income Portfolio or Ninety One Diversified Income.
Neither of them are ‘bangers’, but they will provide a smoother ride over time.
Minor versus major
Minor-key songs have increasingly dominated Eurovision. In the last 20 years, only two major-key songs have won – 2011’s ‘Running Scared’ (for Azerbaijan) and 2017’s ‘Amar Pelos Dois’ (for Portugal).
However, investors shouldn’t assume that the future will be the same as the past, nor is a minor key song a magic formula for success – as plenty of UK artists have found to their cost.
There will also be areas of financial markets that can ‘win’ for a long time. Most recently, this has been seen in the US technology sector. But investors can start to tire of a single idea.
The US technology companies have had a major wobble since the start of the year and investors need to be wary of assuming one style will be permanently in favour.
It can be worth taking a risk on a part of the market that has been out of favour – the UK, for example. We’d suggest a fund like CT UK Equity Income, which could bring a bit of balance to a portfolio in case investors change their minds.
Politics can matter
It has been a source of endless frustration to Eurovision fans that there appears to be a political element to the judging process.
The post-Brexit run of ‘nul points’ for the UK may just have been bad luck (or bad songs), but it didn’t quite feel like that. Fans have noticed that there appear to be voting blocs among specific European regions.
Politics can also interfere with stock market performance. The recent volatility in markets, for example, has a single political source – the new US President.
While this may not matter very much for markets in the long term, it will affect the fortunes of individual countries in the short term.
This is why it is worth maintaining a breadth of geographic exposure, including countries that aren’t necessarily in Donald Trump’s sights. That would include the UK – perhaps through a fund such as the AXA Framlington UK Mid Cap Fund.
A bit of magic
The iconic Eurovision moment when the ladies of Bucks Fizz ripped off their skirts was a visual and musical twist. No-one needs this sort of behaviour from their fund manager, but all great fund managers have a bit of magic. They have a special something that sets them apart from their peers.
They may be harder working, more insightful or better able to spot the opportunities that others overlook. Either way, when you’ve found one with that little bit extra, you need to stick with them through thick and thin.
Enjoy Eurovision this week. Just don’t let any of them near a suit, or your investment portfolio.
Darius McDermott is managing director of FundCalibre and Chelsea Financial Services
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’ views are his own and do not constitute financial advice.
