Helping Advisors Blog

With summer Olympics fever running high, it occurred to us at Russell that some parallels can be drawn between successful athletes and successful investors. Of course, there’s the athlete’s lesson that practice can make perfect but won’t necessarily guarantee gold medals. The investing corollary might be something like experience can certainly make a difference, but won’t always guarantee the best benchmark or peer-relative performance in every time period.

We were especially curious about the performance difference between the champions of the decathlon (where athletes compete across 10 track and field disciplines) and the individual champions of those same 10 events. Would the results be comparable – or would there be noticeable differences in their performance?

Well, at the Olympic games just concluded in London the champions of each of the individual events ran faster, jumped higher and farther, vaulted higher, and threw further than the overall champion of the decathlon. This makes sense intuitively. It seems it would be hard to be the best at 10 disciplines that require a different type of skill, focus and approach.

Specialists outperform generalists

Source: London 2012 Olympics

I would argue that the same holds true for money managers. For instance, a manager skilled at selecting attractive U.S. equity investment opportunities won’t necessarily be best at identifying the top global bond investment opportunities. Making successful investments in the two asset classes requires different skills, perspectives, sources.

So, as an investor, it would seem that there are situations where it makes sense to focus energy on identifying managers that specialize and excel in an individual asset class and then combine them together – rather than hiring a generalist manager or spending resources on trying to master the nuances of successful investment selection for each asset class yourself. With thousands of managers to choose from, investors may even consider opting for a strategist who specializes in selecting and combining specialist managers into portfolios.

Which will you choose as medal-worthy– a generalist, or a group of specialist managers?