Under-Performance

“Nothing works all the time and in all kinds of markets.” Adam Smith, The Money Game

“I am pointing out humbly that it is impossible to be right all the time on Wall Street.” Roy Neuberger

“I’m 76 years of age.  I've been through a number of down periods.  If you live a long time, you’re going to be out of investment fashion some of the time.” Charlie Munger

“A true believer has to endure long, lonely stretches out there in the cold and bleak winds of the investment wilderness as an exile from the herd, when his or her style doesn’t work and the world thinks he is both wrong and crazy.” Barton Biggs

“I believe superior long-term performance is a function of a manager’s willingness to accept periods of short-term under-performance. This requires the fortitude and willingness to allow one’s business to shrink while deploying an unpopular strategy.” Rob Rodriguez

“We expect to have negative years on occasion (and our record makes that point clear!). Those who take a longer term perspective – and the shorter term fluctuations in their stride – tend to be amply rewarded in the long run (our record makes that clear as well).” Frank Martin

“It is also worth bearing in mind that we do not seek to outperform in every reporting period or in all market conditions, rather we seek to outperform the market and other funds over longer periods of time.” Terry Smith

"Every great investor has bad periods. The ones who stick to their approach the most diligently probably have the worst periods because approaches go in and out of favor." Seth Klarman

"All great investors and investment approaches have bad patches; losing faith in them at such times is as common a mistake as getting too enamored of them when they do well. Because most people are more emotional than logical, they tend to overreact to short-term results; they give up and sell low when times are bad and buy too high when times are good." Ray Dalio

“If you put a manager on probation because he had a bad quarter, if he sells the stocks that are down and buys the stocks that are up, you have forced him into a poor decision. But it has happened, and now everybody wants to know how you did last quarter. Nobody says, ―how did you do in the last ten years? which is what matters.  Every manager and every approach has times when he, she, or it is out of favor.” Howard Marks

“To capture superior long-term results you have to be willing to endure short-term underperformance.” CT Fitzpatrick

“We do not expect the fund to perform well in all market conditions and portfolio concentration can cut both ways – with the potential for outsize falls in different conditions.” Nick Train

"We have under-performed in ten of our 49 years, with all but one of our shortfalls occurring when the S&P gain exceeded 15%." Warren Buffett

“If I can forecast anything, it is that we will have years in which we underperform and years where we over perform. Across all those years and all those markets, we will strive to eliminate the noise, keep our focus, maintain a long-term view, trade lightly, dig deep, and cover the ground.” Rajiv Jain

"Over the 22 years of its track record, our US portfolio has underperformed the S&P 500 on six occasions (or 27% of the time). This is in line with our "Rule of Three" which stipulates that we accept to underperform the index one year out of three on average. This average, if we can maintain it, would be far superior to the overall performance of portfolio managers. It is a difficult task to maintain outperforming the S&P 500 but it is our mission. We must accept the fact that we will sometimes underperform the index over the short term when our investment style or specific companies are out of favor with mainstream thinking. And we try to welcome rewarding periods of portfolio out performance with humility." Francois Rochon

"The great track records are not produced in linear fashion, and are far from consistent. Outperforming over many market cycles is not done each year, or every three years, or five years, or ten years. There are long periods of underperformance that go with every outstanding track record. All the great investors have had clients leave them after periods of underperforming. Walter Schloss, who compiled one of the all-time brilliant track records, shrugged as he was losing clients in the late 1990’s because he was underperforming and wouldn’t give them the tech and internet exposure they felt they needed. He had seemingly 'lost his touch' and was out of touch with modern thinking. Many that fired him had been clients for decades, having invested with him since the 1950’s and 1960’s. It must be expected that longterm outperformance will come with durations of underperformance, perhaps as much as half of the time over short-term intervals. As the intervals lengthen, periods of underperforming recede. At the end of the day, we all know what happened with the tech bubble. It ended badly." Christopher Bloomstran

“Just as I don’t expect the best companies to show their excellence every quarter (or whenever they report operating results), I don’t expect our investment results to be any smoother. In fact, our investment approach almost necessitates a very bumpy ride. Nearly all great investors who I admire achieved high long-term returns through bumpy rides. There surely will be times, even extended periods, that we underperform our markets and may have negative results. But, just as I expect our portfolio companies to do very well over time, I expect our investment results to approximate their operating results over time.” Li Lu

"Empirical research concerning successful long term investment results indicates that under-performing the S&P 500 25%–40% of the time is not uncommon for successful investment managers. In fact, it appears to be normal. Investors who understand this are more likely to stick with a perfectly valid long-term investment strategy in the inevitable and, we believe, normal, under performing periods. It is all too human, in the field of investing, to extrapolate recent results, which have no statistical significance, rather than emphasizing long-run odds and empirical data." William Browne

"Swings in performance are cyclical, and even the best investors have episodes, sometimes long episodes, of underperformance. You pay a fee to an investment manager to obtain over time annual returns that, on average, are at least a couple of hundred basis points higher than those provided by an index fund. Compounding this extra return over the years results in staggering wealth enhancements, even after paying considerably higher fees than index fees." Barton Biggs

"The common practice of hugging a benchmark (usually resulting in common results) is a practice we eschew. Ignoring this practice has allowed us to significantly exceed the return of the S&P500 over the course of 13-years; however, it almost guarantees that we will have periods where we underperform, perhaps significantly." Allan Mechum

"Trouble comes in all kinds of shapes, sizes, and directions. We find it worrisome that too many investment folks, trouble begins and ends with underperforming a benchmark." Paul Singer

“If you’re a long term investor, you’re not trying to keep up with your peers or the market on a short term basis, so by definition, every now and then you will lag. When times get difficult [and you are under-performing] you have to do some hand holding.” Jean Marie Eveillard

“History is replete with examples of investors with outstanding long-term track records who endured multi-year periods of underperformance at various points along their path to great success. In a speech presented to Columbia University in 1984 (The Superinvestors of Graham-and-Doddsville) Warren Buffett discussed how some of the best value-oriented investment disciples of Ben Graham managed to significantly outperform the market over decades despite having to endure some big and extended bumps along the way.” Chris Mittleman