Pressure. We all feel it. But right now, it’s intensifying for all Australians as mortgage rates and grocery bills go up and every measure of wealth – be it the value of your home or your superannuation balance – goes down.
For stock pickers, wealth advisers and institutional investors who are in the business of growing and protecting wealth, it is particularly stressful.
Public markets are gyrating violently as winning trades swap places with losing trades.
Meanwhile, in private markets, the gap between valuation expectations and a new reality is widening for everything from construction loans in Sydney’s eastern suburbs to coveted stakes in Silicon Valley’s artificial intelligence developers such as Anthropic and OpenAI.
This is indeed a moment of immense social, economic and financial volatility, and of indiscriminate technological disruption. And it was under these circumstances that elite money managers and their clients jetted off to Queenstown for the Sohn Hearts & Minds investment conference.
Now in its 11th year, it has been billed as the event where the world’s smartest sharemarket investors share their best stock picks for free.
But at a time when paths to survival and sanity trump prosperity, the sagest advice for the 400 strong audience was how to stay in the game.
Those insights came not from battle-hardened fund managers but from two high-performing sports stars. Just before the lunch break, Dan Carter, the former New Zealand All Blacks rugby union flyhalf, sat down with ex-rugby league star Cooper Cronk to discuss how they had learnt to perform under pressure. Sometimes, it’s outsiders who get the most cut-through.
Carter admitted that the All Blacks never actually learnt to deal with pressure until a forensic psychologist was recruited to help.
“The first thing that he did is to change the mindset around pressure for us because we always saw it as a bit of a burden,” Carter told the audience.
The psychologist, Dr Ceri Evans, told them there were two types of pressure: that of a homeless person finding food every day, and that of a high-performer with a weight of expectations. The latter is simply a daily reality for successful people, from elite athletes to executives to fund managers.
“The fact that you got pressure in your lives … it’s not a burden; it’s a privilege,” he said. This was an occupational hazard that could not be suppressed. But having a greater awareness of one’s mental state and the tools to retain as clear a head as possible could limit its adverse effects.
Outcomes are measurable
While there is a temptation to over-extrapolate performance on the sporting field with performance in investing and in business, there are clear similarities.
One is that outcomes are measurable. For fund managers in listed markets, their abilities are being judged with relentless high frequency, and that complicates the objective of shutting out the noise.
Friday morning’s harrowing 5.5 per cent fall in the Nasdaq would no doubt have rattled the tech bulls in the audience, and as the headlines rolled in, it became clear that a few hedge fund desks were casualties of the big swing.
But the pressure is all-consuming for investors, and for the institutions and wealth advisers who have been hurt this year in various ways. The quality and growth investors have taken a whack, skilled small-cap managers have been battered, while investors who liked the high returns from private credit are dealing with the headache of redemption gates and rising arrears.
Former Melbourne Storm halfback Cooper Cronk, who won premierships at the Melbourne Storm and Sydney Roosters, said the way to deal with pressure is the same in business and sport.
“If you are focused on the outcome, it’ll distract the process. If you focus on process, it’ll deliver the outcome,” he told Dan Carter. For instance, if he has to kick a field goal to win a grand final, he will have to shut out the scoreboard, the 80,000 people in the ground and the viewers at home, and focus on the specifics of dropping the ball and swinging the boot.
Cronk also explained the power of keeping things simple. Melbourne Storm coach Craig Bellamy would have a few simple non-negotiable rules, such as making tackles and chasing every kick like your life depended on it.
These common objectives allowed the players to stay focused.
Importance of culture
The rugby duo also had plenty to say about the importance of culture.
The All Blacks’ habit of leaving the change rooms spotless, or sweeping the sheds, is well known. It is a demonstration of humility that fosters cohesion, which Carter said naturally applied to the corporate world.
“If the managing director walks past the office and cleans up the cups, and then employee number 403 sees that … it’s almost a trickle-down effect,” he said.
The most significant difference between sport and business, Carter said, was the sheer brutality of accountability. In sport, the feedback is harsh and instant. In business, if you make a mistake, you can hide in the corner.
But Carter said that even the ferocious All Blacks could take criticism personally, and had devised a phrase called “enter the danger” as a mechanism to give harsh but constructive feedback without making it confrontational.
“It just gave us that ability to have those challenging conversations … which is something that we lived and breathed every weekend in sport,” he said.
Few appreciate this more than Todd Boehly of California-based investment firm Eldridge Capital.
The billionaire’s main message is that risk comes in many forms. For conservative investors, the inability to make their money work hard enough can prove extremely costly in the long run.
In the sporting world, he’s clearly prepared to have a go. Boehly is a part owner of some of the most successful sporting franchises in the United States but is best known for his investment in the Chelsea Football Club.
The club has spent hundreds of billions of dollars building a winning team but has struggled to deliver the desired results, raising doubts whether his bold plan for the club is going to work.
Boehly, it seems, is still coming to terms with the intense rivalry among fans in the United Kingdom’s capital. “They all hate each other and then go to work with each other,” he said.
The other challenge is expectation when only one team can be champions, but at least 10 believe they should win. “There’s going to be upset people and the distribution of that upsetness in the media is staggering,” said Boehly.
The discontent is not helped by the fact that there are more newspapers per population in the United Kingdom than anywhere else.
“The heat is always on,” he said.
It’s a plight many in the funds management industry can sympathise with.
The heat is always on, and the market always finds a way to humble anyone who thinks it’s been turned off by their abilities. This time, the environment feels a little different, more unpredictable and with fewer places to hide.
For many, the pressure to perform has now become the pressure to survive.
This article was originally posted by The Australian Financial Review here. Licensed by Copyright Agency. You must not copy this work without permission.
