Magazine Issues » February 2018

CAMRADATA NEW LISTING: This time, it’s personal

City_buildingsArdevora’s founders aim to manage clients’ money as they would their own.

Ardevora is an independent global equity boutique. The London-based investment management company was founded in 2010 by fund managers Jeremy Lang and William Pattisson.

The duo founded Ardevora with a simple vision: to run clients’ money in the same way they would look after their own, in a stimulating and enjoyable working environment. Today, Ardevora has eight partners and more than 25 employees.

We manage around £5 billion of assets across Global, UK and SRI funds, and work for a diverse range of clients around the world.

Our investment team is led by our three experienced fund managers, Jeremy Lang, William Pattisson and Ben Fitchew. All three collectively share responsibility for the performance of all of our portfolios and make all stock decisions.

Investment philosophy
Our approach to investing is fundamental. We are stock-pickers. We look at many of the same things as other fundamental investors, but we think we do it in a slightly different way. Like most investors, we aim to invest in well-managed, low-risk businesses. But, unlike most, Ardevora’s process is grounded in cognitive psychology: the study of how we perceive the world and make decisions. It recognises that the key players in investment markets have biases that affect their behaviour and lead to poor judgements. We aim to identify areas where bias exists and exploit the anomalies that occur in markets as a result.

Although business models and market cycles will change, human behaviour does not: people will always display bias as they are hardwired to make systemic mistakes. These biases especially manifest themselves in the financial markets, where the conflation of very intelligent, ambitious people with lots of information thrown at them creates a ripe environment for bias.

The cognitive approach
We find it easier to understand bias in financial markets by looking at company management, sell-side analysts and buy-side investors. Cognitive psychology tells us that company managers, despite being intelligent and well informed, are especially susceptible to overconfidence bias. If the environment they face allows them to, they can take on too much risk.

We take the view that, all things being equal, management are likely to push a business harder than is sensible. In our view, financial analysts can often underappreciate how fast, and for how long, unusual businesses can grow, especially relative to superficially similar businesses. By exploiting this tendency, we hope to identify interesting ‘growth stocks’.

Separately, investors can often become sceptical and nervous about companies after a traumatic event. By exploiting this tendency, we hope to identify interesting ‘value stocks’.

These biases create an opportunity for investors who can identify them and know how to position their portfolios to take advantage accordingly.

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