Reflections on behavioural finance and overconfidence
Since the early 2000s Fishwick had been visiting South Africa 5-6 times a year (ideally during the Northern Hemisphere winter!) to meet long standing wealth manager clients. A recent 2025 presentation to fund managers in Cape Town discussed challenges for fund managers in a behavioural finance framework.
Fishwick finds that fund managers are overconfident in their forecasting edge, and very few can in fact maintain a systematic advantage.
“In the late 80s and 90s we got some calls right and some wrong, but even when we got it right markets did not always react in the way we expected. Surprisingly good or bad corporate earnings or inflation releases did not produce the expected response. This is because a negative surprise is not bad news for seriously mispriced assets, meaning that the marginal impact of good or bad news was very limited. In the early 2000s, post the Asian/LTCM/TMT bubble, emerging assets got very cheap and did not need any news – just the absence of bad news. And when assets were very cheap in 2008 and 2022 worrying inflation news had limited impact,” says Fishwick.
He continues: “Turning points are often more about emotion than any fundamental catalyst or earnings stimulus. When we see extreme negativity, we see a better than normal chance of a rebound, even if there is no news”.
Fishwick sees no need to rationalize any sort of price action and would rather react to it: “There are always surprises and big market moves without any data or headlines. Markets are on a constant price journey of endogenous uncertainty and the hugely difficult question of how to price risk within a massive range of fair value. Markets move within bands of fair value for no reason”. Fishwick often alludes to academic research, and endogenous uncertainty is fashionable in analysis of macroeconomics and credit crunches.
“Managers major on economic and corporate macro views to the exclusion of emotional behavioural stuff. The industry is arrogant and complacent in claiming information edge, insight and forecasting prowess. It is always hugely tempting to present a highly credible and complete economic story. Rarely do managers talk about how it feels – the emotions of embarrassment, anger, frustration and regret that come after rapid price action. EQ just gets ignored but managers need to talk about self-awareness in a humbler way, why they believe things and be more self-effacing. They need to be humble about their frailties,” says Fishwick.
“It never gets any easier and we need to re-read all of the materials that codify questions around our quarrel with the market and have a sharper focus on the emotional journey,” he sums up.
Legacy and team handover
Fishwick reportedly retired from M&G Episode in July 2024 but in fact he remains a consultant to them and some other firms. He has stepped back from day to day investing; Gautam Samarth has taken on the lead portfolio manager role, with Stuart Canning and Tristan Hanson as co-portfolio managers. “There are co-PMs, but I formed the view that you need one trigger puller making ultimate decisions at the heart of the investment thesis and philosophy, and this is very different from the pod shop model,” says Fishwick.
“I still visit the office regularly but do not want to tread on their toes,” says Fishwick, who was keen to pass on the ultimate decision-making role after so many years leading the team. “I was never off duty even when fishing in the Pacific Ocean or climbing Mount Kilimanjaro because the portfolio is always live. The time had come to transition to a slightly less frenetic pace with less pressure to be constantly explaining everything and more time for travelling.”
Shaping the team and incentives
Fishwick has helped to shape the team. He got involved in graduate recruitment, hiring people including Canning, while Samarth moved over from another part of the organization. “I sought people who could be self-aware, self-effacing, not know everything and search for perfect information. Some had studied psychology or history as well as economics. There was no aversion to PhDs, but we did not find the need for them.”
Fishwick negotiated a classic hedge fund-style model with remuneration more closely linked to performance. Bonuses were partly deferred long before AIFMD required this, to signal a serious commitment to the investor base.
Fishwick’s legacy of recruiting, mentoring, training and incentivizing the team, and his style of management, have survived his direct involvement in the portfolio.
Continuity in 2025
The style of portfolio management has continued in the same vein. In 2025 the strategy was up about 9% for the year to October. As is often the case, gains had come from areas that had seen bouts of weakness in the previous year such as Mexico (around its own election and Trump’s second term), Korea (around the Japanese flash crash), and China and European banks paired against shorts in US equity. In April 2025 the portfolio engaged with the Liberation Day sell-off in a relatively limited way. “The nature and speed of the sell-off were interesting but did not tick all the boxes. We did not think it was stressed enough to take a big position,” says Fishwick. It has also gained from the US dollar decline with a customized emerging market currency carry trade including some Latin American currencies, a Brazilian bond and the Turkish Lira.
After the strong gains in previously unloved areas of the equity universe and some recent recovery in developed market duration trades, the portfolio entered November 2025 below its historical maximum levels of exposure and has plenty of dry powder for trading the next major macro episodes.
