Barrie Dunstan’s latest book, Investment Legends, is a soothing read during troubled times. While the author has deliberately avoided a focus on the fast-moving crisis which enveloped the financial world since last year, readers can readily guess at what the most successful investors make of it all: never panic.
Dunstan, the Australian Financial Review’s main writer on investment management and superannuation since 1987 – a year which before this one was considered the most challenging for the financial world since the Depression – has racked up many interviews with well-known funds managers over the years.
In this book he chooses 15, with just one Australian – Sir Ron Brierley – to provide a blend of investment philosophy, personal experiences and hints for success. Two key themes emerge which are particularly relevant in today’s conditions: invest most confidently when markets are at significant turning points and invest for the long term.
The book is based on a series of articles written in 2006, updated from late 2007 and into early this year, and it is clear that several of the ‘legends’ were uneasy about the state of the world back in 2006. These included not only the perennial bear Jeremy Grantham, of GMO, but also Gary Brinson, a blast from the past who sold his firm to UBS in 2000, and Bill Gross, the chief investment officer at PIMCO.
A pleasant surprise is that the book also serves as an up-to-date history of the funds management industry, with many references to books by the funds managers and academics, and breakthroughs such as the development of portable alpha by Bill Gross and Morgan Stanley’s Martin Leibowitz. One of the most enjoyable chapters of the book is that on the odd couple Warren Buffet, 77, and his deputy Charles Munger, 84.
The wise-cracking Buffett, who has hearing difficulties says: “I can see and he can hear.” Munger peers through milk-bottle-bottom glasses. Munger tells a story of a young man who sells private partnership interests to investors, suggesting he can get 20 per cent returns.
Munger asked him where the 20 per cent figure came from and the man replied “if I told them anything lower they wouldn’t give me the money”. Buffet backs him up with this quote: “There’s no-one in the world who can earn 30 per cent on ‘big money’. It’s amazing how gullible pension funds and other investors are. They want it so badly that they’ll believe even total nonsense.”