Elkstone is Ireland’s leading international multi-family investment group, which builds diversified portfolios with a forward-thinking approach. Trinity’s Student Management Fund (SMF) welcomed Paul Gorman, Elkstone’s Chief Investment Officer, to the Arts Building on Wednesday evening.
It wasn’t Gorman’s first time at Trinity. In fact, he studied ESS (BESS only gained a B sometime later) in the college 30 years ago. He told the crowd that he “never expected to be standing here”, seeming chuffed to have been invited back. Since his time at Trinity he has spent 18 years with Pioneer Investments (now Amundi), where in addition to portfolio management roles he was also head of European equity research.
Gorman was friendly. He began the talk with an attempt at humility, stating that in his 30 years since finishing his course he had “forgotten most of what [he’d] learned”. Considering his expertise and storied career, this was hard to swallow. Gorman has over 30 years experience as an investor, which has primed him thoroughly for the type of talk he delivered. It covered the considerations that a portfolio manager needs to understand, advice for budding investors, and many, many graphs, which unfortunately went completely over my head. Mainly, he seemed to be addressing the future investors of this country, imploring them to accept that markets are not always what they seem. He took this point and applied it to cyclical sectors, which are types of industry that are sensitive to the business cycle, such that revenues are generally higher in periods of economic prosperity and expansion, and are lower in periods of economic downturn and contraction. The housing market is an example of a cyclical sector: looking at the value of housing over several decades graphed, you can clearly see how GDP affects investment in the area. If an investor knows where the market currently stands in the cycle (is the value of houses going up, or going down?), they stand to make a lot of money. Misjudging the position will result in an investor losing a lot of money. Say, if at the end of 2008, you decided to invest in a lot of houses because they were being devalued. So you spend your coin and soon you sit back and laugh. Unless your company had the luxury of waiting out the housing and financial crisis of the last decade you have lost money. Misjudging where we stand on this cycle leads to unwise investments that lose worth.
Gorman referenced several surveys of investors, some of which are still ongoing (Sentix runs a weekly survey for example), pointing out the most commonly made mistakes. He said several times that investors continuously make the mistake of having unrealistic expectations. Investors need more realistic goals and aims when calculating the potential return of an investment. Market earning estimates are unreliable; investors need to stop counting their chickens before they hatch and they certainly need to stop counting on the fabled golden egg. Scarily, one survey showed that only 8% of investors asked could correctly give the definition for a Fixed Income Investment/Investing when asked. Essentially it seemed he wanted to warn the students off repeating common mistakes being made by the investors in the workplace today. Gorman also dropped nuggets like: “Bonds are math. Maths is hard” – and you have to wonder why people with this attitude toward math would pick a career so dependent on it.
In a talk that ran for over an hour, there were too many graphs to recall – probably over 40. Gorman is clearly fond of them anyway. With his teaching aids he gave the attendees a practical run-through of a selection of cross asset considerations, different valuation approaches and sources of information for an Equity Portfolio Manager. The speaker was secured by Trinity SMF who continue to find excellent and experienced professionals suited to educated Trinity business students on all matters financial.