This edge is often flagged by frequent appearances at the top of performance tables, but it can’t always be empirically measured, and isn’t detected by checking boxes in the course of due diligence. It consists of “intangible factors” that emerge as managers articulate their experience and ways of investing. “You learn their depth and breadth of knowledge, their understanding of how the market works and what it means for their stocks,” Hill says. Ian Macoun regularly meets managers interested in launching a venture with backing from his latest incubator, Pinnacle Investment Management. Some call him to scout out the opportunity. Others are interested but don’t make the cut. There are few managers the veteran incubator calls “genuine money makers: investment professionals who produce returns year, after year, after year.

They’re scarce in an industry where only the best will do.” Their ability gets noticed pretty quickly, but requires time and many long conversations to understand. “It’s not something people can fake,” Macoun says. “I formed the view quite a long time ago that there were too many people managing money who didn’t have these abilities.” “The more time you spend in the industry, you realise that the essence of what people want when their money is managed – good performance – is scarce. And now there’s more than $1 trillion to be managed. “A particular type of style might be favoured by a particular market environment. But it’s obvious to me: they have to talk convincingly about what they own and why.”

Even though Macoun’s money makers are all individuals, they do share personality traits. There are basic common interests: they are good with numbers and are analytically minded, they are competitive, deeply interested in financial markets and are invariably attracted to the money-making opportunities they offer. But the best see through market turbulence and have enough resolve to enforce their views. “It’s a very perverse career,” says Perpetual’s Sevior. “When the news is bad, and newspaper headlines are screaming that the world’s finished, it’s often time to buy. When times are good, it’s time to sell.” Similar to a fundamental equity investor, Macoun learns a lot about the prospects he backs by talking to others in the industry. He meets with gatekeepers, asset owners and, most importantly, he talks with prospects’ rivals. “Typically a good money maker knows the other money makers, and they respect each other because they know how hard it is to be good. And there’s jealousy there, too.”

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