On leading on service, custom-made acronyms and building your network one 'bucket' at a time
In our regular video series, we interview the wealth sector’s key decision-makers to discover how they think about life, both within the world of investment and beyond it; what brought them into the business and what keeps them here; and what makes them and their companies tick
Perhaps we should just be grateful John Husselbee does not support Accrington Stanley. Asked what he most looks for in individual investments, the Liontrust head of multi-asset happily reaches for a custom-made acronym based on his beloved Tottenham – or, more succinctly, ‘S-P-U-R-S’.
“At the end of the day, we are looking to outsource investments – so we are looking for great fund managers or great fund manager teams,” Husselbee tells Wealthwise editorial director Julian Marr in the above video. “This is where I have a strong belief there is no such thing as consistency of performance over the short term. It does exist in the long run, I think, but over the shorter term, it has to be about consistency of process and style.
We are looking to build our portfolios with a blend of managers and styles and, for what I look for in a manager, we basically have the acronym ‘Spurs’. Is the video is going to turn off now?”
“We are looking to build our portfolios with a blend of managers and styles and, for what I look for in a manager, we basically have the acronym ‘Spurs’. Is the video is going to turn off now? The ‘S’ is for ‘stamina’ – so it is about the long term. The ‘P’ is for ‘process’ – consistency of process. ‘U’ is ‘understanding’ – so that is experience and knowledge in the market and living through cycles. And the ‘R’ is ‘Resoluteness’ – and that is very much about conviction in what you do.
“Finally, the second ‘S’ is for ‘stimulus’– in other words, how people want to be rewarded. That could be economic but I just find, when you are investing with great, long-term fund managers – and I’ve worked with many, and I’ve invested with a lot – at the end of the day, they just like winning. They see investment as a challenge – a mental challenge. It’s a puzzle every single day of the market – and they just like winning.”
Contracting globalisation
Elsewhere in a broad-ranging chat – which also covers the importance of two-way client conversations, a focus on investment from an early age and, conversely, reassurance to those in their 20s and their 30s who are less clear about what they want to do that “you will fall into something you like and you love” – Husselbee argues the opportunity and challenges of the current investment outlook both stem from contracting globalisation.
We are no longer in a synchronised world – if indeed we ever were – and, while the US was the big winner over the last decade or so, going forward the case for diversification is probably stronger than it has ever been.”
“As a result of that, we have a global economy that is fragmenting,” he explains. “So, over the last year or so, we have seen Europe essentially cutting rates; we have seen the US initially cut rates and then hold – and, remember, some of the cutting expectations were a lot greater than what has happened; and thirdly, in a different direction, we have seen Japan put rates up.
“One of the good things that has come to pass, though, is it seems as if the central banks have got a grip on inflation – a grip that does not necessarily take it back down to that sort of 2% target, but one that at least keeps it lower and towards it. I do think we are in a secular inflationary environment – having been in a deflationary environment for the whole of my career, which is now nearly 40 years.
“So what does that mean? It means that the cost of capital goes up but the cost of capital is different around the world – and so different companies, different sectors, different industries, different countries will benefit at different times. We are no longer in a synchronised world – if indeed we ever were – and, while the US was the big winner over the last decade or so, going forward the case for diversification is probably stronger than it has ever been.”
A full transcript of this episode can be found after this box while you can view the whole video by clicking on the picture above. To jump to a specific question, just click on the relevant timecode:
00.00: What excites you about the current investment outlook? What worries you?
03.34: What do you most look for in an individual investment? What constitute ‘red flags’?
07.22: To what degree should professional investors be thinking beyond so-called ‘traditional’ investments? Towards what?
08.52: What drives your approach to client communications?
12.20: What was your path into investment – and, if you hadn’t taken it, what do you think you would be doing now?
18.32: What is the biggest investment mistake you are prepared to admit to – and what did you learn from it?
22.21: What advice would you have given your younger self on your first day in this business?
23.40: Two ‘Choice Words’ recommendations, please – one a book; one a free choice?
Transcript of ‘Choice Words’ Episode 12:
John Husselbee, with Julian Marr
JM: Well, hello and a very warm welcome to another in our series of ‘Choice Words’ videos where we get the chance to speak to key decision-makers in the world of UK fund research and fund selection. I am Julian Marr, editorial director of Wealthwise Media, and today I am thrilled to be talking to John Husselbee, head of the multi-asset team at Liontrust. Hello John.
JH: Hello there.
JM: Or should I say, ‘Hello, Huss’! Still, less of me, more of you and into the first question straightaway – what most interests you about the current investment outlook? What gives you pause for thought?
JH: Today, I think the opportunity and the challenges are either side of the same coin, basically, and that all surrounds globalisation – and globalisation contracting. As a result of that, we have a global economy that is fragmenting – and so, over the last year or so, you have seen Europe essentially cutting rates; you have seen the US initially cut rates and then go and hold – and, remember some of the expectations of cutting are a lot more than what they have done; and then thirdly, in a different direction, we have seen Japan put rates up.
So in a world that is now fragmenting in terms of a global economy, that creates both opportunities and challenges. One of the good things that has come to pass is, basically, it seems central banks have got a grip on inflation – a grip that does not necessarily take it back down to that sort of 2% target, but a grip that keeps it sort of lower towards it. Still, I do think we are in a secular inflationary environment – having been in a deflationary environment for the whole of my career, which is now nearly 40 years.
So what does that mean? It means that the cost of capital goes up – but the cost of capital is different in each of the countries or regions around the world. As such, what that means is different companies, different sectors, different industries, different countries will benefit at different times. So we are no longer in a synchronised world – if we ever were in one or, you know, what seemed to be a synchronised world. So, if the US was the big winner over a decade or so, then I think going forward, the case for diversification is probably stronger today than it has ever been.
So that is a positive on the basis that inflation has come down. It seems – and perhaps we should all be touching wood here – that central banks have managed to bring that down without bumping into a big recession. That is not to say we won’t see a recession – but, if we do, it is going to be a shallow one. You know, we see numbers where, perhaps, when we are bouncing around zero, of course, we could fall into a technical recession. So, in terms of an outlook today, I would say I am ‘risk off’.
Come on you S-P-U-R-S!
JM: Good start – good scene-setting – and we go then from the macro right down to the micro. What is it that most attracts you to an individual investment? And what would you see as a red flag?
JH: Well, at the end of the day, we are looking to outsource investments – so we are looking for great fund managers or great fund manager teams-type scenarios. And this is where I have a strong belief that there is no such thing as consistency of performance over the short term – I think it does exist over the long term. Over the short term, though, it has to be consistency of process and style. So, like a football team – and I know we share that passion – we are looking to build our portfolios with a blend of managers and a blend of styles. And I think you are going to like my football analogy for, basically, what I look for in a manager – as we have the acronym, ‘Spurs’! Is the video is going to turn off now?
JM: I was going to say – who had five and a half minutes or whatever in the Spurs-related sweepstake! Still, we knew it was coming – so bring it on!
JH: So ‘S’ is for ‘stamina’ – so it is about the long term. The ‘P’ is for ‘process’ – consistency of process. ‘U’ is ‘understanding’ – so that is experience and knowledge in the market and living through cycles. ‘Resoluteness’ is the ‘R’ – and that is very much about conviction in what you do. And, finally, the second ‘S’ is for ‘stimulus’– in other words, how people want to be rewarded.
That could be economic but I just find that, when you are investing with great, long-term fund managers – and I’ve worked with many, and I’ve invested with a lot of them – at the end of the day, they just like winning. You know, they like winning over a period of time – they see it as a challenge. It’s a mental challenge – it’s a puzzle every single day of the market – and they just like winning.
JM: It has only just occurred to me but it is lucky you support Spurs and not Accrington Stanley! So what is the flipside of ‘Spurs’? What are your red flags?
JH: With red flags, we can go through sort of the normal stuff, which should be picked up in any process, in terms of risk management – but presumably you are trying to nail me down to one. Let’s do that – and it has got to be liquidity, OK. I mean, at the end of the day, liquidity is the big one and that is what you have got to be wary about. Now, perhaps liquidity hasn’t been that important for a while but, you know, in 2008 – by God, liquidity was a very important thing.
You know, if you have an investment process that is successful with a small fund, as it grows, it becomes larger and that brings challenges and there is the liquidity challenge. I worked at Hendersons with John Alexander, who was, I would say, a prolific UK smallcap investor, and it was almost like clockwork – that fund would operate very well, from about £100m to £300m.
Remember we are going back to the 1990s – so a different size of market – but, from £100m to £300m, it was probably one of the best smallcap funds. Then, at £300m, he would almost say, Don’t buy me because I am almost at the limit of my capacity. And the funny thing was, it would tend to underperform – people would redeem and get it back to £100m – and guess what? The whole cycle would go again. And I think that is a definite acknowledgement of liquidity.
Regular access and transparency
JM: That is very interesting. It also ties in very neatly with my next question, I suspect, which is the extent to which private investors and their advisers should be thinking beyond equities and bonds to more ‘alternative’ investments – clearly liquidity is a consideration there too.
JH: I think it is a massive consideration – and, again, we went through that period of a low inflationary, low interest rate environment, where people were looking for enhanced income or different sources of capital. I think, when it comes to alternatives, you fall into two buckets – you are either looking to enhance your returns or protect on the downside – but, either way, you are looking for further diversification. And, you know, most of these things tend to get promoted after they have performed, rather than before, but it is all about manager skill – that’s your determination here.
There is no asset class to think about, there is no sector or anything like that – it is all about determining manager skill. And, when fingers have been burnt in the past, it is because of that. Therefore, to be a so-called professional fund selector, the advantage we do have – beyond any sort of information advantage, which has basically disappeared these days – is access to managers, regular access to managers. It is that transparency that, I think, helps us with our risk management.
Two-way conversations
JM: Thank you. Moving on to client comms now – and I know you have been prolific in this over the years – how would you describe your approach to client communications?
JH: Well, when you think of the various different business models out there, we are firmly in that sort of multi-asset space. So we are competing against those who lead, perhaps, on technology, those who lead on price and, you know, those who lead on performance – and I have already stated my objection to that, in terms of it not being sustainable – whereas I think where our edge lies is to lead on service.
At the end of the day, having done this for quite a while now, I think there are three things you have got to deliver to clients: the first is first-class administration – though, perhaps these days, it is more outsourced to the platforms and the like; first class service, though, is the second – and you can be in control of that; and the third thing you can be in control of is performance in line with expectations.
If an adviser is entrusting you with their clients’ money – and, by the way, it is quite an honour to have that and something I do not take lightly – then you have got to be able to inform them on a regular basis, and in many different ways, what is going on within the portfolios. So we work as hard as we can in terms of being a service-led provider in the multi-asset space.
Currently, for example, we are doing a series of roundtables around the country, which is an opportunity to talk to our advisers, manage those expectations of where we have been and, perhaps, a little bit of where we are going. I don’t have a crystal ball but, clearly, we try to outline some expectations of what we think is going on. But it is just a great opportunity to have a two-way conversation.
So many times, if you have based yourselves in London, to sit in London and just think you know what is going on is wrong. A great example of that, actually – and I remember it very well – was the Brexit vote. Again, we were doing our regular roundtables and events around the country so you are wandering around – and the City of London, if you remember, was very strongly ‘Remain’ yet, when we went out and about and started talking to clients, you suddenly thought, Hang on a minute, I am meeting a great many people who want out.
And you couldn’t help but notice the boards outside people’s houses as well – and that sort of sets you thinking, I’m not sure this is a shoo-in here. I remember coming back to the office and sitting opposite me was Mark Williams, who ran the Asia team in those days, and I said to him, Actually, going out and about, I don’t think this vote is as clear-cut as we think – I think it’s going to be a lot closer. Now, I didn’t say I thought we were going to be out but I said it was going to be a lot closer – and that is the reward you get for going out and about and not just sitting in some sort of – what do they call it? – ivory tower. Have you ever seen one of those?
JM: An ivory tower? We have one at home but I’m not allowed anywhere near it!
Eyes on the prize
JM: So let’s do some more personal questions now – first, what was your path into the wonderful world of investment? And what do you think, in a parallel universe, you would be doing if you had not taken it?
JH: I still think the foundations of my path exist but the way to go about it, would be more challenging today. I was probably quite lucky that, as a young teenager, I knew what I wanted to do – and I know, having a couple of kids myself, that is not necessarily the case. Indeed, from doing mentoring today, I know it is not necessarily the case – not only for teenagers, but people in their 20s and their 30s are still not quite clear about what they want to do – and one comment I would make on that is, Don’t worry about that because you will fall into something you like and you love.
For me, though, the whole world of financial markets was something I very much got exposed to when I was quite young, through my grandfather on my mother’s side. I am one of three brothers. I am the baby – I always say that – and that, again, had its opportunities and challenges. But one of the things I found myself doing was basically staying with Granddad on weekends, when my two brothers were off at swimming galas – they were quite good at swimming, to say the least – and it was a fairly regular thing.
Granddad had shares and, on a Saturday morning, we would wake up and we would walk down to the newsagents, where Granddad would buy the Racing Post and the FT and I’d get a comic or something like that. We would come back, we’d have breakfast – dripping was a thing in those days but let’s not go on to that as this is not a food programme, is it! Then Granddad would get a ledger out – his ledger of shares – he would shout out the share prices and I would write them in the book.
I would do the mental arithmetic, in terms of valuation, and then we would look through the book for price changes – and we would look for stories in the FT to basically try and work out why the prices had changed. Now, most of the stocks he had were sort of retail – pubs and cruise lines and things like that – things that he really knew about, that he could see day in, day out. He wasn’t necessarily punting or speculating – he was just saying, you know, I think they have a good product so I’m going to buy some shares of that – and that whetted my appetite for investing.
Just going back to the Racing Post, the other thing we would do is select the horses and then go back down to the bookies and Granddad would put on his ‘Super6’ or whatever it was. Then we would come back and watch the racing, which was on just after the wrestling, obviously – I am of that age! So that whetted my appetite, as I say.
I had an opportunity to go to university – both my brothers went into further education. But I decided I would buck the trend – and also buck those comparisons between how my brothers had done compared to me. No-one I knew was in the City – well, not in the family, I should say – but there was in my sort of ‘network’. I am a very keen golfer – most people who know me, know that – and there were plenty of people at the local golf club who were stockbrokers in the City.
And so I started to talk to them about, If I am interested in financial markets, what roles are there? In those days, it was merchant banks – it’s investment banks today – and there were opportunities for school-leavers. Literally, I wrote a letter, got interviews, got offered jobs and ended up at Rothschilds. Actually, from where we are recording this today, it is 200 yards over my shoulder and up a bit.
JM: Or up quite a lot, given we are deep, deep down in the basement! And in the parallel universe, what would you be? A professional golfer?
JH: Seriously, as I said, I didn’t really have any other idea apart from, This is what I want to do and be involved in. I don’t think I’m unique in that but I do think I’m lucky in that. So I had my ‘eyes on the prize’ and, however I was going to get there, that is where I wanted to get – and again, doing mentoring, it is really clear that sometimes you have to take steps to the side to find your final destination. So, I can’t really say, No – if I wasn’t doing this, I would like to have done that. It wouldn’t be true because I knew exactly what I wanted to do.
JM: Fair enough. I think the difference for you is knowing exactly what you want to do. I ‘knew’ what I wanted to do when I was a teenager – to be a lawyer – and how wrong I was! But I only realised that after I did all the qualifications. So the trick therefore is maybe realising that, as a teenager, you don’t know what you don’t know – for a start – and it took me a while to find out. You were lucky because you did.
JH: Yes, but I had the conversation with people working in the City, If I go to university and I basically want to end up being involved in the stockmarket, does that help me or hinder me? And the answer that came back to that was, Neither – it doesn’t really matter which route you take. So how about some other routes?
Well, as I said, I was told about the school-leaver programmes and these things called merchant banks and how, if you basically started off at the right place, you could build a foundation. So, you know, your life is basically plotted with luck – and my luck was that I spoke to the right people and listened to the right people and ended up at a merchant bank, which gave me that foundation.
Skill and luck
JM: Well played. Now, what is the biggest investment mistake you are prepared to admit to? And what did you learn from it, if anything?
JH: First things first, if you just connect this back to school and education, making mistakes was something you were generally penalised for yet, when younger junior managers come in, the first thing they have to realise is you are going to make mistakes. So you have to be humble enough to realise you are going to make mistakes and, not only that – that, when you make those mistakes, sometimes you have misanalysed and sometimes you are unlucky.
So skill and luck plays a very large part in this. You and I talk sports all the time – mainly football – and I think sporting analogies work really quite well with the world of investment. And, in terms of making mistakes, the 60% rule works. You know, if you get 60% of your decisions right – either by skill or luck, it doesn’t really matter – then, over the long term, you are going to be up there among the winners. I think that is true whether you’re looking at motor racing, say, or tennis – you know, you look at Roger Federer, he won 80% of his singles matches over his career but just 54% of points played. So I think that 60% rule works.
So first things first – you are going to make mistakes. Then comes all that stuff around learning from them – of course, it does. You have got to record them down. You have got to be honest with yourself. You have got to adapt. That takes time as well – to understand whether you were lucky or unlucky, skilful or unskilful. However, when I think of mistakes I have made, it comes down to breaking the ‘golden rule’ of compounding – you know, days out of the market and so on – and so it is when I would have been tempted away from that.
And there is no better illustration than 2008, when there was that ‘slow car crash’ type of environment through the summer. And, you know, we cashed up – that was fine. That was a good call. But then the next call is, Well, when are you going to put it back in? So I don’t regret what we did but we basically said, Well, we are not sure how this market is going to play out. But who does? We talk about uncertainty of the future all the time, don’t we? No-one has a crystal ball.
Still, what we decided was – I think, in a very prudent risk-management way – we will basically just divide those monies up into three parts and, over the next 12 months, we will put one in now, one in the middle and one at the end. And we put some rules in – you know, basically, should the market go up this amount or down this amount – then we would put the next bits in. Fine – we carried that out over a 12-month period. Had we put all the money back in on day one, of course, the clients would have been better-off.
So it is thinking about compounding all the time – and, when you’re making those big calls and you are coming out of the market, well, history is not necessarily on your side, as we know. Just look back at the data: the 10 biggest rises in the market, over my 40-year career, most of them came in 2008 and 2009 – that period when we were basically splitting the monies into a third, a third, a third. So, with hindsight, that would have been a mistake – and the mistake was actually not adhering to the power of compounding.
Seize your opportunities
JM: Just a couple more quick questions. What advice would you like to have given yourself on your first day in this business? If you can remember that far back … sorry, that came out ruder than I mean it to!
JH: Well, it’s true, isn’t it? It is almost 40 years ago! I do think that whole humbling of mistakes is probably the biggest one – but, you know, it’s also about seizing the opportunities when they are given to you. And sometimes there have been times where perhaps, being a rather cautious or prudent type of fella, I haven’t taken some of those opportunities.
Still, I think I have been quite lucky, really, in terms of the way things have panned out – and my largest slice of luck is the people I’ve met, the people I’ve worked with and the opportunities they have given me. Hence why I’m always keen to give opportunities back to others.
Books and buckets
JM: That is nice – and I should feel I should end there! But I am going to push on with my last question. We always finish by focusing on the ‘Choice’ part of our ‘Choice Words’ name – please could you come up with two recommendations – one a book, one a ‘free hit’ on anything – to recommend to our viewer?
JH: Yes. I read books all the time – not least as a source of learning, which I would recommend to anyone in the investment business, or any business – and I read quite widely as well and various different things. I am reading a book at the moment, called Unreasonable Hospitality. It is about a restaurant in New York, which gained not only Michelin stars but also recognition as one of the world’s best restaurants. And, if we’re focusing on being service-led, that is a great book. I mean, yes, it talks about the hospitality industry – but it’s more than that.
If we are talking about a book for a fund selector, then the book I would recommend – among many others, by the way – would be Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life by William Green. I just think it’s a superb book and a great book for understanding how some of the greatest fund managers work and how they how they operate.
But a broader recommendation than that – as I said earlier on, the way I found for myself into this industry, those foundations still exist. Clearly, you start with your education – whether that is primary, secondary, further education or however far you want to go. Call it a bucket – you fill that up. Your second bucket is your network – you know, you start with your parents, you start with your family. Then you have got your extended family, then you have got your friends – and you build your friends from primary school all the way up.
And building your network continues throughout your whole career, along with your knowledge and your skill and your experience, which builds all the time as well, and that basically allows you to build your career. And I think those, those buckets are important going forward. You know, some people spend a lot of time in education but I’m not necessarily sure that provides you with the greatest job and career prospects going forward.
As I said, what you need to do is always be building your knowledge and your skills and your network – and therefore thinking, when you are moving on to the next job, does it do those things? Don’t just move because it’s going to pay you £25,000 more – move because I’m going to be building my knowledge, I’m going to be building my skills and I’m going to be building my network. Because that is the way you build a career over the years – and, when I think back over my career, it basically fits then as well.
And, as I said, I was very clear about what I wanted to do when I was a teenager but there is another great book out there, called How Generalists Triumph in a Specialised World by David Epstein. It talks to basically those people who are specialists and those people who are generalists and there are two people he characterises in the book. And, you know, I like playing golf and I love watching tennis – and one is Roger Federer, who was very much a generalist and did not focus on tennis, until he was 16 or 17 or 18, so quite late in life. Whereas Tiger Woods was basically born with a golfclub in his hand and he always knew exactly what he wanted to be.
So, if you are a teenager or in your 20s or your 30s and you’re thinking, I’m not still quite not sure where I want to be, then read that book, because I think it will give you the encouragement you need – that actually you’re not alone and you might not find, I suppose, your calling in life until much later on. As I said, I know I have been lucky – I am very happy in what I do. I really enjoy what I do. And the number of times I get asked, When are you going to give it up? Well, when I don’t enjoy it – and at the moment, I love it. I am fortunate in that.
JM: Excellent. Maybe I can throw in one recommendation of Roger Federer’s graduation speech at Dartmouth University in 2024 – just to unite two of your points. As for ‘Unreasonable Hospitality’, that sounds like the title for a forthcoming memoir of my life as a journalist. John, thank you so much – that has been so interesting and lovely to have you on. And thank you very much for watching.
Please do look out for further Choice Words episodes as they are published
