Inside Investment: Go macro to get ahead
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Inside Investment: Go macro to get ahead

Too few fund managers are paid to make asset allocation bets. That creates opportunities for those that do.


Once upon a time a clever, handsome and well-paid fund manager, dressed in a fine handmade suit, was walking along Cornhill in the City of London when he stumbled upon a lantern. A curious sort of fellow, he gave the lantern a rub and a genie materialized. “Listen,” said the mischievous apparition. “If you believe all that three wishes tosh, you’re more stupid than you look. You get one wish, sunshine, so make it quick!”

The fund manager thought for a moment. Calculating the potential size of his bonus and the opportunity to impress his colleagues, he asked: “What will be the level of the FTSE 100 12 months from now?” The genie sneered: “Look, mush, it’s not my job to make your life easy, but I will tell you that there is a 70% probability that cash will outperform equities.”

How would a rational fund manager use this magically sourced information? He is a good son, so he telephones his mother and tells her to sell all her shares. He is confident in his own investment skill, so he sells only half of his own equity portfolio.

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