The world’s greatest investors: Martin Taylor
Legendary investor Martin Taylor's focus was on emerging markets.
After studying history at King's College, Cambridge, Martin Taylor joined Coopers & Lybrand as an auditor in 1991, qualifying as a chartered accountant in 1994. He then moved to Baring Asset Management, managing investment trusts focused on eastern and emerging Europe. He left Barings to join Thames River Capital, for which he ran the Nevsky Fund (from 2007 he ran it through his own company). In early 2011 he turned it into a listed investment trust, which he ran until 2015, when he retired from investment.
What was his strategy?
Taylor focused on emerging markets especially the countries of the former Soviet Union and combined a top-down approach (which involved forecasting economic trends) with a bottom-up approach (looking for individual firms that could benefit). He wound up his fund in 2016 after he concluded that this approach could no longer be profitable if companies (and countries) were unwilling to be open about their performance.
Did this work?
During his final two years, Nevsky did relatively poorly, losing 1.4% in 2014 and making only 0.4% in 2015. However, between 2000 and 2015, the various versions of the Nevsky Fund returned an average of 18.4% per year, so £1,000 invested in the fund would have been worth £13,130 in 2015. This was vastly more than either the 7.4% per year from the MSCI Emerging Markets index or the 3.5% per year from the MSCI World index, during the same period. If you include his performance at Barings, his returns were 22% a year, compared with 5%-6% for the main developed and emerging-market global indices.
What was his best trade?
While at Barings, Taylor spotted that Russian oligarchs were stashing large sums of money abroad, causing currency reserves to decline, contradicting official suggestions of a trade surplus. When rumours about Yeltsin's health caused Russian shares to wobble in September 1997, he realised that the bubble was over, dumping all his Russian shares (40% of his benchmark). Not only did he avoid the subsequent 80% market decline, but he was able to buy emerging-market stocks cheaply again in the aftermath of the October 1998 default.
What lessons can investors learn from him?
Looking critically at economic data, rather than just taking it at face value, can reveal information that others may have missed. However, trading requires an edge, so if you feel that your strategy no longer works or it's becoming impossible to make money there's no shame in taking a break from the markets, or trying a different approach.