As the England manager, Terry Venables notched up one of the best win rates in football history, selecting squads that steered the nation to 22 victories out of 23 games.
But El Tel’s tactics go beyond football. Venables, who lifted England from its 1994 low to the highs of the 1996 Euro finals, can teach discretionaries a thing or two about fund manager selection.
Rather than relying on fund managers who are currently brilliant, Richard Oldfield, chief executive of Oldfield Partners (pictured), said he uses the ‘Venables System’ to select investment managers for his clients and funds.
‘When Terry Venables was manager of England, he scored players on several different headings, such as skill and agility, and that provides a sort of quantitative approach that is particularly useful when two or three of you are seeing a fund manager,’ Oldfield said.
Oldfield told Citywire South West that he relies on several key principles.
‘Choosing a manager is not easy and it’s much more difficult to choose one that’s going to outperform than the layman thinks,’ Oldfield said. ‘We score managers under four headings; people, approach, process and environment,’ he added.
Oldfield said that when selecting a fund manager it is important to choose one able to put their judgement into practice.
He said: ‘There are many people who are exceedingly good at analysis but suffer from analysis paralysis. In other words, they analyse, but no actions are taken. This doesn’t show in the numbers.’
It is important to find fund managers willing to execute their convictions, but not so stubborn they can’t recognise the need for change.
‘Choose an approach you have sympathy with. That way, when it goes wrong, you know why you were there,’ Oldfield advised.
This can often mean choosing managers that adopt a similar investing style to your own. Oldfield Partners is a value house and likes managers focused on finding cheap, unloved stocks. In Oldfield’s view, it is better to invest in fund managers who are less benchmark aware, because index huggers will always act retrospectively, and chase their tail when it comes to performance.
‘You can have the right manager but the wrong environment,’ Oldfield said. He argues that the noise of the City fraternity can often cloud investors’ decisions, which can increase portfolio turnover.
He explained: ‘The key thing is distance from the frenzy of markets – that is a good thing to us, because, on the whole, turnover is the enemy of performance.’
Such ‘noise’ might be newspaper headlines that prompt unnecessary trades, but it could also include the mask some managers wear in order to appear highly skilled.
Oldfield urged: ‘Peer beneath the veneer. It’s that impeccable image of the investment banker flicking invisible dust from his suit and appearing to have all the answers [versus] the counter-presentational principle of the fund manager who walks in with his gut slightly out and searching through his briefcase, uttering that the documents he needs are “in here somewhere”.’