Meerdter’s masterclass: the extra dimension

Many professional investors will not consider investing in a fund until they ‘see the whites of the portfolio manager’s eyes’ and ‘press the flesh’. Despite all the technological advances that have made remote communication seamless, it is as important as ever to meet in person.

Meeting with a manager directly, we learn things that cannot be picked up in any other way. Through a personal encounter, investors are able to make the judgments needed to gain a sense of confidence, trust and commitment.

Manager meetings inform two specific areas of how investors make decisions. One we might describe as primitive and ‘bodily’, the other is sourced from highly advanced brain functions and therefore described as ‘intellectual’.

Keynes was on to something

The resurgent interest in Keynes’ discussion of ‘animal spirits’ has illustrated the importance of human psychology in financial markets.

It has been shown that these basic psychological ‘drives’ are at the root of how we behave; we rarely act in a purely rational manner. Behavioural finance is now accepted as central to understanding investors’ motives and reactions.

Fund selectors are investors in human capabilities and talent. Much of our developing opinions and judgments about portfolio managers stems from how they are perceived through personal meetings.

Our ‘animal matter’ and how we interact directly with one another in a physical space is an important part of the encounter.

Close up and personal

 The Hidden Dimension is a thought-provoking book written by Edward T. Hall some 50 years ago. It is best described as an anthropological study of, amongst other things, the implications of physical social distance on how humans interact with one another.

Hall goes into fascinating detail about the physical attributes we are able to perceive about one another in direct meetings. These ‘perceptions’ inform our opinions and understanding.

Hall tells us that, at a distance of about a meter, ‘details of the other person’s features are clearly visible…fine details of the skin, grey hair, “sleep” in the eye, stains on the teeth, spots, small wrinkles… noticeable feedback from the muscles that control the eyes’ are perceivable.

At the same time, we can smell body odour, perfume or cigarette smoke. We can easily detect subtle changes in voice tone indicating nervousness or irritation.

But surely, professional fund investors don’t rely on animal instincts? Well of course they do. Think back on some of the manager meetings you have attended. I will bet that some, if not all of this, rings true with your experience.