Einstein said, “Insanity is doing the same thing over and over again, and expecting different results”

But in a recent interview, Howard Marks applied a financial twist to that definition saying,

“Insanity is doing the same thing, in an entirely different environment, and expecting the same result (as you received in the previous environment)”

explaining further

“So the things that worked the best in an environment of declining and ultra-low interest rates, will not necessarily be the things that work best in a period of stable and generally higher interest rates”

He’s right

And this perhaps explains the 3-year and 5-year under-performance of some of the large and popular funds – their style suited the “old environment”

But aside from inflation and interest rates, the “old environment” also enjoyed:

– Fast growing technology companies
– Cloud and AI excitement
– Huge passive flows
– Mostly split House and Senate majorities = stability
– In a stable geo-political world

Whereas now

– Technology companies are larger, making growth harder
– Cloud is slowing and Deepseek dampened the AI excitement
– Republican control + Executive order mayhem = uncertainty
– In an unstable geo-political world

The passive flows continue … for now

But unless we’re going back to the “old environment” anytime soon

Aren’t most investors wrongly positioned?

With significant “risk” given their large exposure to “old environment” winners – large US companies?

Well, not if that’s their “benchmark”

Risk = “tracking error”, have you forgotten?

Ah yes, the benchmark – which only rose in the “old environment”

Well, maybe in this “new environment”

Those benchmarks could fall…

And who wants to perform in line with falling benchmarks?

Making it a great moment for Active managers who want to be … Active

and not worried about “tracking error”

but rather focused on “non-tracking sense”

because as Sir John Templeton once said,

“You can’t outperform the market ….. if you buy the market”

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hashtag#numbersnotnarrative

Disclosure

This is not advice, do your own work

The content of this marketing material is provided for information purposes only. It does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, shares, units of other interests in investments referred to herein. Past performance does not predict future returns. Capital is at risk. Ranmore Global Equity Fund plc has not been registered under any United States securities laws and may not be directly or indirectly offered or sold in the USA or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of a US Person.