Film buffs will have recognised the famous line from the title of the article. In one of the most difficult moments of the Apollo 13 odyssey, the Chief Engineer in the control room acknowledges aloud that they are facing what will be the toughest moments in NASA's history, to which the engineer played by the great Ed Harris replies: «...the crew will have to face the toughest moments in the history of NASA.«With all due respect Sir, I think this is going to be our finest hour.«one of the most legendary lines of the film, along with the well-known «Houston, we have a problem».
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You may be wondering what this film has to do with investments and financial markets. Well, as you may know, it is common for fund and managed account managers to write newsletters and notes to investors in the worst moments of the markets. In them they usually report their view of the crisis situation, try to justify the losses, reason their strategies by reaffirming them or by giving a change of direction, etc. All this in an attempt to reassure investors, thus trying to prevent them from withdrawing their trust - and money - from their fund managers. Such communications abound and are almost obligatory for any self-respecting manager, since it is in difficult times that the relationship between managers and investors needs to be strengthened.
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This time, however, our attention has been drawn to the letter written by one of the fund managers that form part of the group of funds and asset managers whose due diligence we are currently carrying out at Cluster Family Office, the identity of which you will allow us to reserve for our Clients. The curious thing about this letter, the title of which is the aforementioned phrase from Apollo 13, is that is not addressed to its investors, as would be expected, but to the managers of the companies in which they are invested. We consider this to be extraordinary, as it is not at all usual to address them publicly in times of stock market crisis, let alone in the terms we translate below from the original letter:
«With all due respect Sir, I think this is going to be our finest hour.»
Dear Partner,
We are all going through very difficult times, both in the health, social and economic areas. It is true that we are not «inside your company» and we are aware of our limitations, but we believe that our vision and perception of the situation can bring you something. Our company manages assets for long investors from all continents, with a high sense of fiduciary service and excellence. We have held 483 online meetings in the past few weeks with domestic and foreign companies, always seeking a better understanding of their business prospects in the current environment. If you in your company need any contact with any of the companies we have relationships with, please do not hesitate to let us know, we will be happy to help. At this time, perhaps a view from 30,000 feet, from a team that is studying various international cases and businesses, may be useful to you. In addition, as investors and partners in your business, we would like to tell you the following:
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- The number one priority at this time is to ensure the health of your professional teams and family members. The emotional stress you are all under is enormous, and being there for your staff and their families at this time is extremely important. Be transparent, empathy goes a long way and reinforces the meaning and mission of each employee.
- Regarding the coming quarters, all company managers, owners and investors have uncertainties and questions. You are not alone. Visibility for this year is very low. Liquidity is king. We all know that the economy will weaken due to rising unemployment. However, we do not think that everything will be different. There will always be demand for good services and products at good prices. The main needs of consumers will remain the same. There is no need to panic or make ill-considered decisions.
- Major crises often precipitate innovation. Trends that already existed will accelerate. We are seeing some companies adapting more nimbly to online commerce and creating digital tools for their businesses. We are excited by the adaptive and innovative capacity of companies and entrepreneurs in our country. We can offer you practical examples from inside and outside our borders.
- These are times when it is interesting to rethink structural costs. But do not forget that people are your main asset. We don't want to be proselytising, but remember the time and effort it took you to find and train your professionals. If possible, don't lose your high potential and don't cut the pay of the key players in your company. And if you do, remember that the same cuts should also be applied proportionally to the top management.
- In difficult times like these, social, environmental and corporate governance (ESG) marketing and practices may seem superfluous. This is understandable, of course, for companies struggling to stay afloat. However, we believe that ESG practices are even more important now. Consumers, investors and professionals will place an even higher priority on companies that take care of environmental, social and corporate governance practices. So don't forget your shareholders. The way you treat your suppliers, customers, employees, the environment and the community around you will be remembered for a long time to come. The old saying «treat others as you would like to be treated» has never been more relevant.
- If possible, you should not only focus on a defensive business position, but it is also time to go on the offensive, as there may be excellent opportunities out there. That company you have always wanted to acquire, or that professional you have always wanted to recruit, may now be more open to talk and listen to your offers.
- Stay focused. In times like these, anxiety makes us want to act hastily. Listen to everyone, but don't change too much or burden your team with new and unnecessary requests. Board members tend to ask for a lot and offer few suggestions at times like these. Maintain rigour.
- Finally, we would like to emphasise our long-term vision. Do not sacrifice the long term to satisfy short-term investors.
There is a scene in the film Apollo 13 that is worth remembering. The mission is going through a very difficult moment. The «boss» says to his engineers: «This will be Nasa's worst moment”, and one of the engineers (Ed Harris) responds: “With all due respect sir, I believe this will be our finest hour! Moments like this define great leaders.
Good luck! Take good care of yourselves and remember the instructions given in case of emergency on all flights: Put on your oxygen mask first and then help the people sitting next to you to do so. If you are not well, it will be more difficult for you to take care of your families and your equipment.
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You can count on us. Best regards.
https://youtu.be/OlR17RaMVmM
Not bad, is it? Unfortunately, not all fund managers take such a long-term, protective view of good business. Most of them are just trying to avoid being embarrassed by their benchmarks, a task in which they fail more than 90%. You can find plenty of articles and statistical studies on the ineffectiveness of most active managers by googling (here, here o here). But it is not impossible to find active managers who justify their fees by outperforming their indices in a convincing and sustained manner over time, especially if we eliminate the barrier of 10% of funds marketable in Spain and we can invest freely in the 100% of funds existing all over the world, as we have explained above. here o here.
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Whether we are entrepreneurs, self-employed or employees, we can all be good investors in difficult times like these. All it takes is a few simple tips, which are otherwise very difficult to follow. Buy when others sell, sell when others buy. And to do so best possible way, outperforming the rates, as the managers who have written this note have been doing for more than 14 years.
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Now, and for a couple of months now, So it is time to buy and not sell, at least until the shoeshine boy, the lift operator and the neighbour in the 5th floor 2nd floor come back to boast about their investments in the stock market and, of course, are vaccinated.