Calvin Mclean | Multi Asset Manager | Credo | mail me |
I write this from London on the eve of England’s first game at the FIFA World Cup. Before a ball is kicked, the airwaves already fill with debate. Has Thomas Tuchel made a mistake by leaving out star names such as Cole Palmer, Phil Foden and Trent Alexander-Arnold?
While some people call for a public inquiry, I can understand Tuchel’s choices as an investment manager. Star names might win you a game or two. However, football is a team game, and it’s a team game in the most literal sense.
It’s a team game when tournaments are decided by depth, resilience and adaptability. It’s a team game because difficult fixtures, unbearable conditions and surprise injuries always lie ahead. If it was not already clear, I am not really talking about the England football team.
Applying football principles to investment portfolios
I am, in fact, a proud Scotsman. But the principles embraced by Tuchel apply directly to investment portfolios. They come in two parts.
First, pick your team on fundamentals, not reputation. It can be tempting to chase the latest buzz. That includes AI, quantum computing, or a 3x leveraged ETF after a 1,000% run. However, the biggest names rarely do the hard yards.
Second, build genuine squad depth. It’s a team game in markets just as it is in football. The quiet positions matter most. These are the ones you question when markets hit new highs. Yet they often protect you when volatility arrives. They reduce drawdowns and prevent panic exits before recovery begins.
When building our Multi-Asset Portfolios (MAPs), we always include these unsung players.
It’s a team game in portfolio construction as much as in sport. This year has already provided two examples that showcase the value of this design This year already provides two clear examples. These examples show the value of this portfolio design.
Our MAPs deliver some of the strongest risk-adjusted returns relative to peers this year.
This aligns with our long-term track record. I now want to explain why.
Picking the team on fundamentals
Let’s start with equities. We do not mistake a passive index for a balanced team. Measured by AI-themed ETF holdings, roughly a quarter of the global equity index now rests on one idea. That idea is that Artificial Intelligence (AI) will deliver strong returns, and soon. I am not debating AI itself. I use it daily and see its real impact. However, good assets are not the same as good prices. That distinction matters greatly.
Passive equity indices are highly concentrated and expensive. Looking at cyclically adjusted price-to-earnings ratios, only the 2000 tech bubble exceeds current US valuations. This matters in the same way conditions matter to team selection. If you expect 35-degree heat, you adjust your line-up accordingly.
You do not load your side with flair players who cannot track back. It’s a team game, and conditions always shape outcomes. This is not theoretical.
We saw this earlier in the “SaaSpocalypse”. AI fears led investors to reassess software earnings. The average software firm fell 18%, and nearly 90% of the sector declined.
At the same time, investors questioned AI infrastructure costs. Big tech shifted from cash generation to heavy data centre spending. By 2025, this spending exceeded the 2000s telecom build-out as a share of national output.
Our selection approach showed its value here. We tilted toward attractively valued companies. As a result, we held roughly 30% underweight in software when it fell. Our software exposure also declined less severely. To be clear, AI remains in our portfolios. We hold about half the exposure of a passive approach.
We accept AI’s potential, but we also accept uncertainty. It’s a team game, and balance matters more than conviction alone. We anchor ourselves in fundamentals. That may reduce upside in extreme scenarios. However, it improves resilience during volatility. It also improves sleep quality during uncertainty.
From the start of the year to 27 February, returns were strong. At that point, markets shifted from an AI focus to geopolitical risk in Iran. Our equity sleeve returned 5.3%. That compares with 3.0% for the MSCI World and 0.7% for the S&P 500.
Genuine squad depth
The second pillar is genuine squad depth. It’s a team game, and depth determines survival over a full campaign. We hold true diversifiers in our portfolios. These assets matter when traditional hedges fail.
When the US and Israel attacked Iran, markets reacted sharply. Iran’s closure of the Strait of Hormuz intensified the shock. Brent crude more than doubled at one point. The shock hit both growth and inflation expectations. Equities fell, but bonds also struggled. Even traditional diversifiers failed to protect portfolios.
In those moments, you turn to the bench. You need players who can hold shape and secure the result. These alternative diversifiers provide that function. They reduce drawdowns and still generate returns.
Over March, geopolitical risk peaked. Talk of a ceasefire had not yet emerged. During this period, markets moved sharply. The MSCI World fell 8.5%. Bloomberg Global Aggregate (hedged) fell 2.0%. Meanwhile, the Bloomberg Commodity Index rose 11.3%. Our trend-following position gained 2.3%.
This demonstrated the value of squad depth. It’s a team game in investing because no single asset class dominates every environment. Depth ensures survival when conditions shift abruptly.
The whole campaign
This brings us back to Tuchel. He underweights stars and focuses on balance. He recognises conditions and builds for the full tournament. That is how a team game is truly played.
On that basis, England has a stronger chance than many admit. I cannot fully bring myself to support them. However, I can recognise good selection when I see it. It’s a team game, after all.
We build portfolios the same way. As asset managers, we prioritise fundamentals over reputation. We prioritise depth over star power. We build for endurance, not highlights. In addition, we design for survival through heat, shocks and injuries. This year already proven the value of that approach. Whatever happens next, the team is built for the full tournament. It’s a team game from start to finish.
