To become content, one must liberate themselves from emotions. Amsterdam-based asset manager Stoic embodies ancient Greek stoicism, aiming to shield clients from emotional investing. “We are behavioural psychologists rather than asset managers.”
The past has shown that economic developments and stock market prices cannot be predicted. Therefore, according to Freddy Forger, founder and partner at Stoic, there is little point in having a comprehensive investment vision. “We invest without vision. There is only one way to do that and that is to buy all companies,” Forger said in conversation with Investment Officer. The MSCI All Country World IMI Index forms the basis of Stoic’s investment portfolios. Many other investment products, the top executive calls “nice for the industry, but not for the client”.
Three quarters of Stoic’s assets under management are in equities, the rest in mainly German and Dutch government bonds. Bonds are mainly offered to clients who want to get back to their assets in the short to medium term, for long-term investors the asset manager recommends equities.
Forger: “I have always seen the 60/40 portfolio as an odd distribution. Whereas the allocation of a portfolio should reflect how the client is currently thinking about when funds are needed again for other purposes. If that is longer than 10 years, then he should choose equities; if it is shorter, then the best choice in my view is bonds that mature when the investor needs the money.”
Terms like offensive, neutral and defensive find Forger too emotionally charged, so profiles like Stoic 100, Stoic 70 or Stoic 40 were chosen. The figure indicates what percentage of the portfolio is filled with equities. “That’s quite clear for the client,” he says.
Staying stoic
A few ETFs to track the whole market: it sounds so simple. Why don’t investors buy their ETFs themselves? Forger: “As the amounts increase, the question arises to what extent an investor can remain stoic. News comes to us every second and the temptation to act on it is strong. By having the money invested, an investor can protect himself from his own emotions. After all, who controls that if he loses his job, he doesn’t liquidate his entire portfolio in all his emotions? It sounds easy to do it yourself and in principle it is, but staying away from it for a period of 30 years is extremely difficult. We actually get paid because we can do nothing better than our clients.”
Moreover, a wrong order on an execution-only platform is easily made. “When large sums are involved, you may prefer to put that responsibility with your asset manager. And it’s not bad to pay a bit for that.”
The formula seems to be working. Stoic saw assets under management grow from 100 million in 2018 to 1.5 billion euro by 2024. The asset manager hopes to take the two-billion-euro mark towards the end of the year.
Customer not central
It is also the piece of investor emotion that remains a challenge for further growth in Stoic’s assets under management, Forger argues. “We have been outperforming the average asset manager for 12 years, although sometimes by just a percentage point difference, but on large sums it can be a lot of money. Still, that is not always enough to make the client switch.”
“Many parties often employ incredibly nice people. Just get out of there. At the average asset manager, the strength lies in building and maintaining the relationship with customers. With us, the customer is precisely not central, because he can actually stand in the way of rational processes, and thus his return, on the basis of emotions. We constantly try to make that clear. In that respect, we are sometimes a behavioural psychologist rather than an asset manager.”