Everyone wants to be different. Everyone wants to be seen to be different. That’s the case in fund management as much as everywhere else.
Every time I speak to a fund manager, he is at pains to explain to me just why he is different – how his method is unique, and how he is just about the only real contrarian out there.
Even the fabulous Jonathan Ruffer in his most recent note was unable to quite resist the temptation to claim difference. It is “absurd”, he wrote, for people who run service industries to “think that they provide a unique service”.
He then went on to explain that his business, if not 100% unique, is at least “considerably different”. I’ll accept that Ruffer isn’t quite the same as most other firms, but I think you get the point.
Unfortunately, there isn’t actually that much difference between most of the many funds on the market (if there was, their performance wouldn’t be so remarkably similar).
Instead, as I say here in the very good SITV shows on the matter, “there is far too much of an attempt to produce difference out of nothing”.
A nice take on this comes from a French mathematician, Jonathan Touboul, who has just produced a paper called The hipster effect: when anticonformists all look the same. It is, says Tom Wipple, in The Times today, all about the “non-concerted emergent collective phenomenon of looking alike while trying to look different”.
The larger the number of people there are in any given group motivated by being the opposite of others, the more that part of the group will end up being the same as each other. You can read more on the paper here, but Touboul has addressed in particular the matter of Hipsters.
They detect a non-conformist trend. Then they all follow it, ending up entirely aligned with each other: the second one person hits on the idea of, say, “playing the sousaphone, while smoking a pipe, they discover that the whole of Shoreditch is strolling around puffing away with esoteric brass instruments”.
You can, as Tom Wipple does, consider this to be “hipster hell”. But the same mechanisms work to create hedge fund manager hell.