An “essential read” authored by Fundsmith’s Terry Smith, 10 lessons from a former US Navy SEAL and an account of Long-Term Capital Management’s collapse are some of the books that Jupiter’s Independent Funds Team credits with making them better investors.
The team runs the successful Jupiter Merlin range of multi-manager funds, which includes the £2bn Jupiter Merlin Income Portfolio and the £1.9bn Jupiter Merlin Balanced Portfolio. It is one of the best-known fund of funds teams in the industry.
Below, its members reveal the books that they believe all investors can take some valuable insights from.
Whaling for Beginners by Jerome Vincent
John Chatfeild-Roberts, co-head of strategy in Jupiter’s Merlin team, opted for a novel that he thinks everyone – not just those interested in investing – should put on their reading list.
“A book for today’s age, Whaling for Beginners is a fast-paced short (c.150 pages) novel following the results of the CEO of packaging company being successfully phished,” Chatfeild-Roberts said.
“Most people don’t realise the far reaching consequences of what appears to be a one-off cyber-attack but after reading this book, you will, and you will be properly on your guard. It reads like a Dick Francis novel, there is a love interest and the outcome isn’t necessarily what you might expect. It’s free on Kindle and only took me two hours to read. Everyone should read this book!”
Thinking, Fast and Slow by Daniel Kahneman
David Lewis, co-head of strategy, went for a book that has been recommended by several other fund managers, thanks to its aim of challenging how we go about making decisions.
“Thinking, Fast and Slow explores the behavioural biases, tendencies and shortcuts our brains can make in the face of uncertainty. It also outlines the flawed rules of thumb we often use to help make decisions and highlights how poorly the average person grasps statistics,” Lewis said.
“Kahneman characterises our minds as having two components: a fast, emotional, automatic side and a slow, logical and calculating element, able to solve challenging problems and capable of deep thought.
“Our challenge as investors is to supress our natural tendency to use the ‘fast’ side of our brain and instead look on the world and new information in an unbiased and open-minded manner, aiming to divorce short-term emotional reaction functions from our long-term decision making. This is, of course, easier said than done, but knowing the pitfalls and putting systems in place to try and navigate these mental challenges is an important step towards improving the decision-making process.”
China’s Asian Dream by Tom Miller
Amanda Sillars, fund manager and ESG director, has chosen an essential read for any investor that wants to understand the ongoing “dramatic shift of global hegemony”: China’s Asian Dream.
“I haven’t stopped singing the praises of this book since I read it two years ago. For anyone who is curious or vaguely interested in politics, economics, history, geography or indeed the future of the world we and our children inhabit, it is essential reading – and fascinating too,” Sillars said.
“Miller explains how president Zi Jinping’s 2014 ‘Belt and Road’ and ‘String of Pearls’ initiatives have been funded and executed. Different chapters cover different regions, each with a handy map to illustrate the astounding breadth and depth of Xi’s remarkable progress.
“Dubbed ‘the new Silk Road’, it draws China’s neighbours near and far into an ever tighter embrace, harnessing the growth potential and exerting increasing financial, soft and hard power across these regions. Appreciating this dramatic shift of global hegemony is fundamental to any investor in global debt and equity markets, commodity, infrastructure or green asset classes. As the regulators say, ignorance is no longer an excuse.”
When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
Assistant fund manager George Fox said When Genius Failed backs up the view that fund management is closer to being an art than a science, while offering a valuable lesson on diversification.
“Aside from being entertainingly written, Lowenstein’s recital of the tale of Long-Term Capital Management is replete with salutary lessons of which any investment manager would do well with being regularly reminded,” Fox said.
“One such lesson is on the danger of believing in the pure efficiency of financial markets. The fund managers’ academic backgrounds gave them absolute confidence in their ability to exactly quantify financial risk and reward. Lowenstein quotes G. K. Chesterton in his illustration of where LTCM went wrong: “Life is a trap for logicians…it looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait”. This has only served to reinforce my belief that fund management is more an art than a science.
“Another lesson is on diversification: the LTCM managers fooled themselves into thinking they had diversified their assets in substance, when in fact they had done so only in form through making the same bet in every imaginable permutation. If every position in our portfolios outperformed at the same time, I would hope that I’d be more concerned than content.”
Make Your Bed by William H. McRaven
Algy Smith-Maxwell, research director of Jupiter’s Merlin team, chose Make Your Bed – which puts cross the lessons that author William H. McRaven learned over his 34-year career as a US Navy SEAL.
“Self-discipline, teamwork, resilience, the ability to deal with failure, courage and optimism are all crucial ingredients to having a successful and enjoyable career. Many of these qualities are learnt through the experiences of life outside of work,” Smith-Maxwell said.
“The military training that I received over 30 years ago taught me many of these lessons. Read this book and in two hours you will soak up practical advice and wisdom on the 10 lessons of life as seen by William H. McRaven, a retired US navy Admiral and Commander of all US Special Operations Forces. Told with great humility, it will make you laugh, wince, pause for thought and above all else feel inspired!”
Accounting for Growth by Terry Smith
Investment director Alastair Irvine pointed out that Accounting for Growth, written by Fundsmith’s Terry Smith, carries the banner ‘the book they tried to ban!’ on its front cover.
“Accountancy books are not known for being explosive, but written in his usual entertaining but no holds barred manner, Terry Smith’s study of the dark arts of corporate accountancy as employed by many major listed companies whether to flatter or deceive, was just that,” Irvine said.
“Smith’s integrity and reputation as an incisive, independent investment analyst was sealed even though it cost him his job at the time. An essential read for any investment analyst.”