The lines that follow are somewhat caricatural and probably tinged with prejudice. Nevertheless, I believe these caricatures generally reflect a certain reality. For simplicity, I will use the masculine, but this includes the feminine as well.
The entrepreneur thinks differently from the executive because his own money is directly at stake: it is invested in the company he founded and leads. This distinction alone changes many things, notably dynamism, opportunism, and the willingness to take risks that are worth taking.
For the entrepreneur, the stakes are personal. The company he founded or acquired is his “baby.” The professional executive is generally less emotionally involved. Note that a certain emotional detachment can sometimes be beneficial; however, I prefer an executive who is fully engaged, even if his emotions can occasionally represent a liability.
The entrepreneur is often less structured and less organized than the professional executive. He goes where opportunities arise, sometimes into dead ends. The professional executive is more composed, thoughtful, and disciplined.
The entrepreneur relies more on intuition, whereas the executive conducts market studies.
The entrepreneur is personally involved; the executive is accountable to the investors and/or shareholders who hired him.
The professional executive is often laden with diplomas, whereas the entrepreneur has often learned at the “school of life.”
In my view, the distinction between an investor and a portfolio manager is similar. The investor more closely resembles the entrepreneur, while the portfolio manager looks more like a professional corporate executive.
The investor seeks attractive opportunities and is willing to take risks if he believes they are justified by the potential return.
The investor invests his own money, while the manager manages other people’s money.
The investor does not worry too much about the relative performance of his portfolio; the manager lives or dies by the relative performance of the portfolio he manages.
The investor is willing to go against the crowd and adopt a “contrarian” approach; the manager is much less so.
Both have their strengths and weaknesses.
In business, as in investing, the ideal is a combination of both personalities. In business, the perfect person would combine the qualities of the seasoned manager and the dynamism of the entrepreneur. In investing, we would like to have an investor who also possesses the qualities of the seasoned manager.
The hybrid between the investor and the portfolio manager represents the best of both worlds. This model produces an alert manager, on the lookout for opportunities and ready to take risks when the potential return justifies it. At the same time, he is prudent and thoughtful. He will strive to properly diversify the risks of his portfolio and will act as a “prudent steward,” knowing that many investors rely on him to invest their retirement funds wisely.
This is the model we have in mind at COTE 100 and to which, in my opinion, every portfolio management firm should aspire. Yet, in my view, it is underrepresented in the investment industry. Most managers invest like professionals, seeking to reduce the risk of relative underperformance versus the markets, without placing enough emphasis on achieving superior long‑term returns. As a result, there are many managers, but very few investors.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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