Q: I understand you are aiming to boost annualised returns into the mid-teen range. This is unusual as many managers right now are happy to make high single digit returns. How can you do this in the current environment?
A: I think there is a twofold rationale for why returns can improve. One is the raw material that is available. There are a lot of different tools we can use to extract more value from ideas, and we have been able to take much more advantage of the macro environment in addition to the stock picking. That wasn’t so much the case, say, five years ago with this fund. So I’m very bullish about the fact that dispersion has been relatively narrow, but is now expanding. And though the natural influence on the market is cyclical, we have been able to take advantage of some of the cyclicality.
The second is our ability to learn from our mistakes. Every time we are wrong, we lose less than the previous time on the same kind of event or on something we didn’t plan for. It means we don’t need to recover as much. It was even true in 2008 in some ways. The team we have in place has shown an ability to rejuvenate itself and to constantly improve.