Ernst Knacke is our Fund Selector of the Month. Ernst is Head of Research at Shard Capital Partners. Prior to joining Shard Capital, he spent 12 years with what is now Quilter plc, in both the multi-asset team at Quilter Investors as well as the discretionary wealth management business, Quilter Cheviot. Before joining what was then still Old Mutual in 2008, Ernst spent 2 years at Goldman Sachs and Morgan Stanley in London. He has a B.Sc. in Mathematics and a B.Sc. (HONS) in Financial Engineering from the University of Pretoria in South Africa and is a CFA charter holder.
What do you think leads to success in the business industry? Can you give some unique advice for people starting a career in asset management?
I believe life is about the consequences of the decisions we make. We make thousands of decisions every day, some knowingly and some subconsciously. In the end, the best way to achieve an objective is by making better and more informed decisions.
With this in mind, to achieve success it’s important for anyone to define what success means to them, and then set an objective in order to reach this state. Achieving an objective is much easier than becoming successful. Then, once your objectives are set, look to achieve them by making better and more informed decisions.
Finally, I believe we need to have a certain state of mind; I call them foundations. These allow us to make better decisions that will result in the intended consequences:
- Be enthusiastic and passionate about what you want to achieve.
- Be confident that you will get there, but never be arrogant. The line between confidence and arrogance is very thin, and easily overstepped.
- Read! And not just investment books. Read sociology, history and philosophy books – broaden your reference.
- Listen to others. Surround yourself with smart people, and learn from them. We will learn from our own mistakes, but we can also learn from the mistakes others make. Whilst the former often have more tangible consequences, the latter might avoid a lot of emotional distress.
- Employ critical thinking, try and be as rational and objective as possible. Understand your own emotional biases. And be honest, with yourself and others. Always!
- Look for opportunities and solutions, not problems!
- Understand the needs and requirements of others, and attempt to align your objectives with theirs. Basically, treat others like you want to be treated yourself!
However, as Baz Luhrmann said in his famous Sunscreen Song, my advice has no basis more reliable than my own experience. So perhaps the best advice I have for anyone is to go out and create their own experiences. And remember to consider the consequences of your decisions!
What is the greatest challenge as a fund selector?
The challenge I frequently come across is that decisions are made based on past performance. Whilst there is information in a performance track record, long term or short term, it’s only information. In itself, it doesn’t tell you anything about the future. This is – in my opinion – the single biggest mistake fund selectors make. The consequences are investors “buy high” and “sell low”. There’s a reason why regulators force asset managers to put “past performance is not a guide to future returns” in documentation, and yet people still ignore it!
The most important factor is however, to know and trust the individual or team you are giving your money to. Building up the level of trust required to truly understand how decisions are made and what will drive future performance, takes time and a lot of hard work.
What sustains your drive within the industry?
For one thing, I strongly believe we can make a difference in the industry: create better structures that will ensure better alignment of interests. One of the problems in the investment industry is the misalignment between the decision makers and the owners of capital – this is one problem I’m hoping we can provide a solution to. It’s good to see an increased focus on ESG and fees coming down, but there’s so much more we can do.
Another is the knowledge that I will learn something new tomorrow! Ultimately, things change, even how we define success! As the world change around us, we need to adapt, which means we need to learn. With this in mind, I know I meet some of the smartest and most informed people in the world – I see it truly as a privilege, and one I might be able to use in order to find that solution!
How do you deal with work-life balance? Do you especially focus on trying to maintain one?
Personally I define success as happiness. And true happiness means you are happy professionally and personally. By neglecting one or the other, I will not ultimately be successful. So maintaining a balance is crucial.
However, I fully embrace the need to be flexible. If our interests are truly aligned, one cannot achieve objectives without flexibility. Not only flexible in the way we balance time, but even in the way we think. On the theme of time, I’m very fortunate to work in an industry where there’s no reason why we cannot be flexible. We have the technology to work remotely or during times which is more suitable. It means I can be there for my children as much as I am for my clients!
Where do you think you would be if you wouldn’t have started a career in Business? Did you ever have any plan B?
I think it’s always important to consider the options that might be available to us when we change our mind or make a mistake. However, I do not believe we should live life with a plan B. As I mentioned earlier, life is about the consequences of our decisions. We are all influenced by the decisions taken by others, and consequences we have no control over.
Life is a journey full of unique experiences. I think if you have a backup plan you will miss too much. Rather, focus on enjoying these experiences and use them to make better and more informed decisions.