Investing in the volatile post-Brexit stock market has never been more risky – or potentially lucrative. And for one man, the pressures of betting big are even greater. As a founder of Man GLG, Pierre Lagrange is responsible for investment of $26 billion of other people’s money. But, with more than 30 years of experience as a hedge fund manager and an estimated net worth of £300 million, he can justify ably claim to be at the very top of his industry.
Today, he divides his time between attempting to stay ahead of the most unpredictable markets in recent years, and his Savile Row tailors, Huntsman, which he bought and has helped to export to New York. And like the best huntsmen, he has made an art out of knowing what his target is going to do next.
Can you explain how a hedge fund actually works?
The term covers a variety of investment approaches. It can invest on both the long and the short side, reducing correlation of investment returns to the markets going up or down. Instead, returns will be more directly related to the manager’s skills and agility.
At Man GLG, we offer a variety of both hedge fund and long-only strategies, but what is consistent is that we allow individual portfolio managers to make their own investment decisions, within risk limits set by the rm. I believe that the more freedom you give to the individuals and the more entrepreneurial you allow them to be, the better the potential results.
Are hedge funds often misunderstood?
Yes; An exceptional fund manager generally isn’t right more than 65% of the time, so for me the most important thing is not to fight to get everything right, but to improve how much I lose when I’m wrong.
So how can one effectively “cut your losses”?
The best way to do this is with decision-making help. There are some amazing technologies. In Japan my team have point of sales data that allows you to see the price of every transaction on every item.
Take shampoo for example: the data available gives every price for a 125ml bottle of shampoo being sold everywhere, every day. Now, why does that matter? Because it’s been shown that price reductions in the first 3-4 weeks of a product launch strongly correlate to the lifespan that a shampoo will have.
That helps you model the value creation of new products and the yield on marketing dollars spent. That said, as much as you can look at data and analysis, individual stocks selection, is an art – not a science
How do you think Brexit will hit investors?
It’s too early to tell, because we don’t know what sort of access to the European single market we will have. What I think people are getting wrong now is believing that the economy hasn’t suffered much. Someone told me recently, very smartly, that you only see old oaks falling long after the core is rotten and that’s what I think is happening now. If you look at the current long term investment level in this country, it’s on the floor, so we can’t say Brexit isn’t an issue.
One way you are helping to keep British business attractive globally is though Huntsman. Why did you buy one of Savile Row’s most historic tailors?
I bought Huntsman by total coincidence, and I put in place a CEO and management team to run the business. Savile Row is just so unique and interesting. You have shopping streets everywhere but there is no other street that solely caters for men’s tailoring on a bespoke level. None in the whole world!
It’s important that we have a rejuvenation and a renewal of men’s bespoke tailoring, and that we don’t let this industry decline, but instead make it t for the 21st Century. In fact, on some level there are synergies between tailoring and investing, both through vehicles such as hedge funds, and in other asset classes such as art.
In what way do the industries have synergy?
They call it the art of tailoring, and I will always remember my art dealer, who happens to be a good friend, telling me that you have to be very wary of the flattery of art. When you like something at first sight, it’s sometimes because it flatters you and it’s too easy.
You have to be careful to work on that feeling when it comes, both for works of art and investment, and truly interrogate why something is attractive. So, while I am attracted to things that have an instant impact, you need to be sure, when you spend that much money, that it’s a good investment – for example, with a piece of art, you need to be sure that you are going to want to see this every day.
What general advice would you give any man who is interested in investing?
That there is no free lunch and cocktail party tips are just a recipe for disaster! I’d also say there is no good reason not to understand how your money is being invested – find someone you trust to work with, and ask a lot of questions.