Is passion for investing important?

Is passion a characteristics of a good funds manager, and if so how does it manifest itself? These issues are explored with a number of Australia’s most respected investment managers.In The Power of Passionate Creatives, researchers John Hagel III, John Seeley Brown and Lang Davison find that, in the United States, only one in five people is really passionate about their work. These “passionate creatives” often feel “held back” in institutional workplaces and gather “on the edges” where unmet needs intersect with unexploited capabilities.

Passion drives people “to find the edges in your profession where the new thinking is going on and the new needs are emerging,” the authors write. The complexity of investment markets and their changing nature are magnetic for passionate investors, and it shapes their work. They become more innovative in their style of investing, and push ideas further. Passion fosters creativity, particularly if workers “have the discipline to master the practices required to drive performance to new levels,” the authors write.

“Passionate” is the word that founder of well-respected Australian equities boutique, ParadiceCoopers, David Paradice circles back to as he describes the traits of good investors. They exhibit an “insatiable appetite” for stocks. It’s evident in the analyst who turns up for work on Monday with a better interpretation of a company’s prospects after reading annual reports and other materials the day before.

Perpetual Investments head of Australian equities, John Sevior says passion is a fundamental part of any good manager. “I regard that as part of the package for anyone in any discipline in life. To perform at the elite level you’ve got to have an intense passion for whatever the task is. Investing is no different.”

But even the strongest passion for investing won’t guarantee success, according to head of manager research at Towers Watson Australia, Hugh Dougherty (pictured), says.

“What is passion? You can’t do anything with it?” Dougherty asks. There are plenty of managers who are very interested in financial markets and love turning up to work. “But it’s not enough to be passionate and to love investing. I’ve met a lot of passionate people who’ve made very big errors. It’s not the determinant of a great investor.”

After hearing, time and again, from managers driven by passion, Dougherty and his team began researching passion – to find out what it is, and how it influences a person’s work. In turns out that these impassioned managers are among the workforce’s most fortunate participants.

The doyens of funds management in Australia – people such as Robert Maple-Brown and Greg Perry – made their name in the years after compulsory superannuation was introduced and performance figures from dominant providers such as AMP rarely saw the light of day. This is when the industry first became obsessed with performance and opportunities for entrepreneurial funds managers emerged.

They have a hunger to learn and actively seek new challenges, transforming them into opportunities to develop new skills and perspectives. Energised, they are driven to take their game to the next level, marginalising the competition. Their passion for work does not define a course or destination, “but it does provide a compelling direction and a tight focus,” and a powerful motivation to transform challenges into opportunities for advancement.

This is all good, but how does passion manifest? Hours spent at the desk is a crude measure. Enthusiasm is better, Sevior says.

“A love for investing. You love the numbers, thinking about the business and where it fits in the industry. Thinking about what makes good management. And the ability to weigh things up.”