Two of Britain’s most acclaimed star fund managers – Terry Smith and Nick Train – are both struggling with a multi-year spell of disappointing returns. Yet they are reacting in very different ways. Smith seems inclined to blame passive investing, company management, the state of the economy, analysts, the state of the market in general and practically everybody else, as seen in his latest letter. Conversely, Train has castigated himself and apologised at length for letting investors down, as anybody who attended the Finsbury Growth and Income (LSE: FGT) meeting this month will know.

The truth surely lies between the extremes. Train has made mistakes in stock selection, but so has Smith (as we all do). At the same time, both have a particular style and are biased towards a type of company that is out of favour in today’s markets. Almost all managers will do better in certain market regimes than others. Recognising that is crucial to deciding where to invest and what expectations are reasonable.

Both star fund managers have had to change their approach to investing

Both Smith and Train have focused – in slightly different ways – on what they see as quality companies: businesses that can grow earnings steadily, earn strong returns on capital and compound over time. They were heavily invested in areas such as consumer staples and placed considerable value on dominant brands. These kinds of companies did very well for much of the 2010s, but many have struggled this decade – not just in relative terms (understandable in a tech bull market) but in absolute terms as well.

There is a range of reasons for this. The era of ultra-low interest rates made the steady and rising income from these kinds of stocks very attractive, which pushed up valuations too high by the end of the decade. The post-pandemic inflation spike and cost-of-living pressures have hurt their ability to keep growing earnings either by selling more or by raising prices.

Emerging-market growth – a key part of the bull case for many – has been patchier than expected. More recently, GLP-1 weight loss drugs may be starting to weigh on demand not just for food but other products such as alcohol (it remains unclear how significant this is).

As these issues have become more obvious, both managers have adjusted their approach. Train is tilting towards data and digital businesses. Smith has shifted more into tech – moving in and out of some stocks with uncharacteristic speed – and has increased his exposure to healthcare. The thesis behind all these sectors is clear.

At the same time, we should note market conditions may not be as helpful to large incumbents as they were in the 2010s. There is far more uncertainty. Will data and software businesses capitalise on AI or be undermined by it? Will healthcare costs and margins come under attack in a much more populist political environment? We just can’t know at this point, and Smith is right to say that investors should be ever more alert for strategic missteps.

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Terry Smith built a formidable reputation as an analyst and business executive before setting out to apply what he had learned to fund management. When he launched the Fundsmith Equity Fund in 2010, he wanted investors to be able to buy directly over the internet. He promised low fees, an easy-to-understand investment process, low portfolio turnover, no shadowing of indices and no attempt to time the market.

Smith’s thesis was simple: “Buy good companies, don’t overpay, do nothing.” Fundsmith seeks to “only own shares that will compound in value over the years, investing in a limited number of high quality businesses with a sustainably high return on capital, strong cash generation and assets that are intangible and difficult to replicate”, says the highly readable “owner’s manual” on his website.

Such stocks may look expensive, but “stock markets typically value companies on the not unreasonable assumption that their returns will regress to the mean,” argues Smith. “Businesses whose returns do not do this become undervalued; therein lies our opportunity.”

Investors agreed. Fundsmith Equity grew quickly, with assets approaching £30 billion by the end of 2021. Returns far outpaced the MSCI World index. However, the fund has seen four consecutive years of underperformance since then, and assets have shrunk to £20 billion. Given that Smith hasn’t changed his investment style, what has gone wrong?

Questions over Fundsmith's strategy

The success of Fundsmith has made the corporate characteristics it seeks become widely popular. This has pushed valuations up – and hence returns down – for these companies. Currently, 27% of the portfolio is in healthcare, which has been out of favour. Conversely, banks – which Smith has says he never invests in – have done very well. So too has Nvidia, despite his scepticism about its valuation.

Good companies can also go through difficult times due to managerial mistakes or a temporarily adverse business climate. This will lead to a falling share price, especially if they have become overvalued. The thesis of “buy good companies, don’t overpay, do nothing” doesn’t cater for this.

For example, Diageo shares – held by Fundsmith since inception – peaked at £40 in early 2022, nearly 30 times prospective earnings per share, well above its historic range. It then became apparent that sales had been inflated during the pandemic and that young people might be drinking less. Valuation alone should have been a reason to sell, but Smith waited until 2024, when the price had fallen 40%.

Fundsmith still owns LVMH, which has nearly halved since early 2023 when it traded on a multiple above 30. It also hangs onto Novo Nordisk, which has fallen by two-thirds since mid-2024 as it loses market share to Eli Lilly in the market for weight-loss drugs. A year ago, Novo’s shares were trading at well over 40 times prospective earnings. It is undoubtedly a good company, and it may bounce back, but surely Smith should have sold earlier.

So there are questions about whether Fundsmith Equity hangs on too long to stocks that have become overvalued. Conversely, it may then be too unforgiving of good stocks that temporarily stray off track. A company such as Diageo could now provide opportunities for recovery.

If this were an investment trust, non-executive directors and analysts would have asked questions about the thesis and the holdings. They would also have queried its 1% annual charge, which now looks high for such a large fund. However, as an open-ended fund it isn’t subject to the same scrutiny.

Fundsmith will probably get its act together again, having learned hard lessons from a tough few years. But there is no sign of it yet.

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Steve Ballmer was Microsoft’s CEO from 2000 to 2014, and today he is one of the richest people in the world, primarily thanks to his stake in Microsoft, along with the company’s founder, Bill Gates. 

As well as his investment in Microsoft, Ballmer is the owner of the Los Angeles Clippers an NBA basketball team. 

According to Bloomberg, Steve Ballmer has a total net worth of $141 billion, making him the eighth richest person in the world, and one of a group of individuals who’ve built large fortunes from technology. 

Here we look at how Steve Ballmer built his fortune and the factors contributing to his net wealth today.

Steve Ballmer’s net worth history  

Steve Ballmer became CEO of Microsoft in 2000, succeeding Bill Gates who co-founded the business and acted as its CEO until 2000. Ballmer had joined Microsoft back in 1980 as the company's 30th employee. As the business grew, he worked his way up through the ranks. He served in various roles, including senior vice president of sales and support, before being named CEO, having built a vast understanding of the enterprise. 

Ballmer's leadership style was known for being energetic and passionate, which was required at the time. During his tenure, Microsoft underwent a period of explosive growth, particularly in enterprise software and cloud computing, and Ballmer's leadership played a key role in the expansion of Microsoft's offering, mainly in the enterprise software (or business software) market. 

The Windows operating system has always been Microsoft's flagship product, and it was a world-beating product when Ballmer took over. However, it continued to evolve and improve throughout the 2000s, under the new CEO's leadership. The release of Windows XP in 2001 was a significant milestone, helping the company cement its position in the market at a time when the world was seeing a tech revolution. 

But Microsoft never took its position for granted. As the internet became more important in people's lives, and more companies sprang up offering connected services, Microsoft shifted to developing software and services optimised for online use, away from PC-based operating systems. Products like Internet Explorer and MSN Messenger made sure the business was at the forefront of the internet revolution, and Ballmer was a key player in pushing the business towards these markets. 

The development of products such as Azure and Office 365, also developed under Ballmer’s leadership, helped Microsoft become the go-to cloud computing and internet enable tech group in the world. As it rode the growth of technology, revenues grew from $25 billion in 2000 to over $70 billion in 2013.

Microsoft’s failures

Despite the company’s success during the 2000s, Ballmer missed some key opportunities, such as mobile devices and search. Ballmer famously dismissed the potential of the iPhone upon its release, and Microsoft's own attempts at creating a mobile operating system were met with little success – something the business is still paying for to this day, although its position in the cloud market has helped it offset most of the lost profits. 

Additionally, the company struggled to compete with Google in the search market, with its Bing search engine failing to gain significant market share. This is also something the business is struggling with even to this day, although Microsoft is a key shareholder in ChatGPT’s parent company OpenAI, and this might help the enterprise gain an edge over its long-time rival. 

What Ballmer did pick up on was the growth of the global gaming market. The establishment of the company's Xbox gaming division took Microsoft out of its core market and opened up a huge new one, even though it was a risk to begin with. Today, Xbox is one of the main console providers in the world.

In 2014, Ballmer stepped down as CEO of Microsoft, marking the the beginning of a new era as it started to build on the success of the Ballmer leadership.  

How Steve Ballmer spends his money  

Even though Ballmer retired as CEO of Microsoft in 2014, he has continued to stay active in the tech industry, investing in several other tech startups, including Twitter (now X) and Airbnb.

One of Ballmer's main focuses today is his role as the owner of the Los Angeles Clippers basketball team, which he acquired in 2014. He is also a lecturer at Stanford Graduate School of Business, where he shares his insights and experience with the next generation of business leaders, and founded the Ballmer Group, a philanthropic organisation with his wife, Connie. 

Warren Buffett is considered by many to be the best investor of all time. When he set out on his own in the mid-1950s, investors entrusted him with just $100,000 (around $1m today) of their capital. Over the course of the past 70 years, he has grown this capital into a conglomerate with just under $1trn of assets.

Buffett started investing when he was 11 years old, buying six shares of Cities Service preferred stock (three shares for himself and three for his sister) at a cost of $38 per share. He made a small profit on this investment and went on to build several other businesses.

He filed his first tax return at just 13 years of age. It was for the 1944 calendar year. He’d earned $592.50 in total, more than half of it from a paper round, the rest from investments. (He paid $7 in tax). The young businessman attended the University of Nebraska before moving to Columbia University, where he met his mentor, professor Benjamin Graham.

Graham essentially wrote the book on value investing and he also managed his own investment firm, which the young Buffett joined when he left university. Unfortunately, Graham wound up the venture a few years after the young entrepreneur joined and he was soon back home in Omaha. Soon afterwards, a group of family and friends asked Buffett to invest their savings in the stockmarket. The Buffett Partnerships, as they came to be known, earned a 31.6% annual return before fees from 1957 to 1968 compared to 9.1% for the Dow Jones Industrial Average. Buffett used a similar investment strategy to the one pioneered by Graham.

The Warren Buffett portfolio and the rise of Berkshire Hathaway

Buffett started buying shares in Berkshire Hathaway for his partners’ portfolios in the early 1960s. At the time, Berkshire was a struggling textile business. Its peers had a much lower cost base so they could undercut the firm on price. As losses mounted, the corporation’s market value fell below the value of the assets on its balance sheet.

The investor wanted Berkshire to start closing its manufacturing facilities and return the cash to its shareholders, which would have produced a fat, risk-free return for all of its shareholders. However, Berskhire’s management declined to follow his plan – so Buffett decided to take control of the business himself.

Buffett used Berkshire’s capital to buy up other firms, mainly companies in the insurance sector. In 1967, he bought Omaha-based insurer National Indemnity Company for $8.6m, giving him his first foothold in the industry. Not only was National Indemnity a well-run profitable insurer, but it also owned an investment portfolio, a valuable source of capital.

Today Berkshire Hathaway owns more than 60 subsidiaries, employing more than 300,000 people. It owns insurer Geico, battery maker Duracell, restaurant chain Dairy Queen, BNSF, one of the largest railroads in the US, and a utility giant, Berkshire Hathaway Energy – that’s all alongside a $300bn portfolio of equities.

Warren Buffett’s net wealth exceeds $100bn

At the same time, Buffett has built a huge fortune for himself. He is one of the richest people in the world (the exact position fluctuates but he’s generally in the top five) with a net worth of $112bn.

Virtually all of Warren Buffett’s net wealth is tied up in Berkshire Hathaway stock. Since he gained control of the business in 1965, the shares have returned 20.1% per annum compared to 10.5% for the S&P 500.

The top stocks in Warren Buffett’s portfolio

Buffett’s investing style can be defined by one of his best-known quotes, “Rule no. 1: Never lose money. Rule no. 2: Never forget rule one.”

Since the 1950s, the investor has always sought to find investment opportunities with a low chance of failure, but high return potential. Buffett seeks to minimise the risk of failure by sticking to companies in sectors that he knows well. “Risk comes from not knowing what you are doing,” as he puts it. He likes to own companies with an enduring competitive advantage, such as a well-known brand or substantial economies of scale, and will not pay over the odds for any business. As a value investor, he prefers to buy when other investors are selling.

In 2008 when the global financial sector was teetering on the edge of collapse, Buffett invested $5bn of Berkshire’s cash in Goldman Sachs, at extremely favourable terms which would have been impossible for an ordinary investor to access. The bet eventually yielded a profit of more than $3bn for the conglomerate. Around the same time he also ploughed cash into Dow Chemical, Bank of America and General Electric.

Despite this impressive bet, Buffett generally does not try to time the market or speculate on the price of securities. He believes that investors should approach buying a stock with the same mindset as if they were buying the entire business. He has encouraged others to “own your stocks as an investment – just like you’d own an apartment, house or a farm – look at them as a business.”

Here are the top 20 equity holdings in Berkshire Hathaway’s equity portfolio (which is managed by Buffett) as reported at the end of March according to the firm’s 13F regulatory filing:

“Today, it is clear to me that this is the most dangerous package of overpriced assets we have ever seen in the US. [Bond guru] Jim Grant would say that we have the most overpriced fixed-income market in the history of man.

“That, combined with an equity market that can easily lose $5trn or $10trn, depending on the magnitude of the break, is a contender for the highest-priced market in American history.” The result could be “a writedown in perceived wealth that would have no precedent”.

So wrote Jeremy Grantham, co-founder and chief investment strategist of Boston-based asset management group Grantham, Mayo, Van Otterloo (GMO), a few months ago. It’s a dramatic prediction from a man with a history of getting things right. For instance, he rightly dismissed the 2003-2007 stockmarket rally as “the greatest sucker rally in history”, warned that the housing bubble of the mid-2000s would burst, and turned positive on stocks in March 2009.

So when we talk on the MoneyWeek podcast (listen to the whole thing here) this great bubble is one of the first things I ask him about. Just how big is it? And – given that the markets have looked expensive for a long time already – how might it end?

A slow, 12-year build-up

It’s big. This has been one of the longest economic upswings we have ever seen. Take out the Covid-19 “blip” (a quick down and up) and “the long, slow build-up had gone on for 12 years”. At the end of a long upswing such as this, “you’re likely to have very substantial profit margins, and if history repeats itself, investors are likely to consider that the high profit margins will last forever”.

That’s the first part of making a bubble: “Very strong economics extrapolated into the indefinite future.” The second part is easy money, which we also obviously have in spades.

Alan Greenspan, former chair of the US Federal Reserve, may have introduced America’s “aggressively pro-asset formula” of cheap money and moral hazard back in the 1990s – but today, rates are the lowest in history and we have just seen the biggest increase in the money supply ever too (a 25% year-on-year rise in the US).

Things have been pretty stimulative outside the US but in most places this just means being at the “top end of their historical range”. Not so in the US, which has “broken way out” in terms of both government and Federal Reserve stimulus. It’s the same with equity markets. Most are at “merely normally high prices”, but the US is a candidate for the highest-priced market in its history.

Big Tech’s extraordinary performance

What makes this worse than a bog-standard bubble? Capitalism, says Grantham, “particularly in the US [which] is a little fat and happy”. The US Department of Justice has allowed industry to become far more monopolistic and concentrated than ever before. But at the same time, companies are less aggressive than they once were. Between the 1960s and the 1990s market share was all that mattered. Now many of the big firms focus on profit margins, using cash flow to do buybacks, for example (something executives love anyway as it works so well with their stock options and is “very low in career risk”).

Look at profit margins in the US and the rest of the world and again you see the difference. In the rest of the world, profit margins have stayed reasonably high but the US has “crashed up to record highs” with a “fairly astonishing 80% gain over the rest of the world in profits”. Even more astonishing however is the fact that something like 85% of this is accounted for by the huge tech companies. “The performance of [Big Tech] has been extraordinary – there’s been literally nothing like it in history, anywhere.”

Take Apple, the company with the biggest market value in the world. Last quarter it announced that sales had risen by 50% in the past 12 months. “Give me a break, this is the largest company in the world,” says Grantham. Traditionally, a brilliant year for a company of this size would mean growth of, say, 5%-6%. There is no precedent for this kind of expansion. “One has to admit these are exceptional companies.”

The secret to America’s success

So here’s an interesting question: why is it that the US has such a dominant share of these great new interesting firms? The answer to that one, says Grantham, is the venture-capital industry. American exceptionalism is not what it was, but one place where it is still very much on the go is here.

The US has two-thirds of the world’s great research universities, something venture capital really feeds off. It also has the right attitude to risk. Americans “forgive failure, they go back and try again, and they throw money at new ideas, and they’ll do 20 new deals, where the careful Germans will do one.

“And so, they have many more failures, but when the smoke clears out of the wreckage of the internet, the Amazons, and for a while the AOLs, tend to be American, and they own these great new enterprises. So, I look at [Big Tech] and I say: where did they come from? And the answer is, they all jumped out of the venture capital industry in the last few decades.”

Still, none of this really justifies the valuations, particularly since the tide may be beginning to turn: note the way in which China has been “bashing its new, special, powerful monopolistic entries”. So what will be the thing that brings this bubble down?

Where is the pin?

There is no point in looking for a pin, says Grantham. “No one can tell you what the pin was in 1929. We’re not even certain in 2000. It’s more like air leaking out of a balloon. You get to a point of maximum confidence, of maximum leverage, maximum debt, and then the air begins to leak… because tomorrow is a little less optimistic than yesterday.”

There are, however, warning signs. “Before the great bubbles ended in 1929, 1972 and in 2000, in the US, the three great events of the 20th century, there was a very strange period in which, on the upside, the super-risky, super-speculative stocks started to underperform.”

Think of it in terms of “confidence termites”. They start with the speculative stuff and gradually reach the rest of the market. This time round we are tracking that path “quite nicely”. When Grantham and I spoke (four weeks ago now), the Spac (special purpose acquisition company) index, bitcoin and Tesla were all substantially off their highs. The Biden stimulus and the good vaccine news have pushed this bubble out longer than Grantham ever expected – as has the huge breadth of market participation. In 2000 it also seemed as though everyone was in the market.

Watch out for the “confidence termites”

“My favourite story, which is completely accurate, was that [in] the local greasy spoon... in the financial district of Boston [there were eight] television sets [and] all but one of them would be showing talking heads from MSNBC and CNN and [the eighth] would be showing replays of the Patriots football team. And a year earlier... eight out of eight were showing the Red Sox.”

You see something similar today: endless talk about Tesla sales and huge numbers of new traders in the market, all too many of them using options. Grantham reckons the termites will have made it to the rest of the market by the end of the year.

Where to look now

Oh dear. Is there anywhere safe for investors, I ask? Back in 2000 there were plenty of cheap things around – houses weren’t horribly overpriced, and neither was the bond market; and value stocks were actually cheap. Grantham agrees there is much to worry about if you are looking at the kind of things that get the confidence termites going: the coming of the bezzle (the fraud cases that appear at the end of bubbles); more evidence that this bout of inflation is not transitory; and, in the US in particular, a worsening of the pandemic.

On the plus side there are some relatively safe havens. One place you really should have some money is in US venture capital. “It’s far and away the most virile part of American capitalism. It has all the ideas. All the best and brightest now come into venture capital, all starting their new firms, as they should.”

His own Grantham Foundation for the Protection of the Environment has moved its assets to 70% venture capital, with much of that focused on the wall of money heading for decarbonisation.

There will be huge amounts of money “trying to get into the new ideas... and they will really prosper.” And the established green companies will also be beneficiaries. GMO has had a climate-change fund for the last several years, for example. “It’s doing extremely well. And it will get hurt in the burst, but it’s a global fund. It will go down less. It will come back quicker. It will run further.“

Beyond that, note that overall the equity market is not as overdone as bonds and real estate (the UK housing market, he says, is a “humdinger” – see below), so if you stay out of the US, choose carefully and emphasise emerging markets.

When the US market collapses all markets will temporarily, at least, come down in sympathy (this is a reason to hold some cash so you can pick up the bargains by the way). However, “you will make a respectable return. Not as much as you would like, but a respectable return” over ten or 20 years. GMO’s current forecasts of annualised seven-year returns for various asset classes (see chart above) suggest that the best value is in this area – high starting valuations imply poor long-term returns. (For context, US stocks have returned an annual 6.5% after inflation over the very long term.)

Grantham would also suggest steering your portfolio towards value stocks, which are “about as cheap as it gets… compared to the other half of the market”. Perhaps buy “the cheaper low-growth stocks in emerging [markets] and carefully-selected other developed countries” (not the US). But whatever you do, do not let yourself believe that everything is fine. It isn’t. This “is a really splendid speculation”, says Grantham, “and of course it will end badly”.

There will be “hell to pay” in the UK property market

“One day there is going to be hell to pay.” That’s Jeremy Grantham’s verdict on the UK property market. Why? Two reasons. First, it is overpriced, and second because while it is possible to get reasonably long fixed-rate mortgages (Nationwide has a five-year deal at just under 1%), in general, “you guys have floating rates, like Canada, Australia, and New Zealand. That means that when rates rise a large number of borrowers will see their monthly payments shoot up.

“Some of those borrowers will turn into forced sellers; given that markets are priced at the margin, prices will crash. In the US it won’t be so bad: we have fixed rates. So, yes, our market will crash and it will be painful, but not nearly as painful as it will be in Britain.”

What can we do? When it comes to mortgages, “go and get the longest one you can”, says Grantham. If the ten-year offering seems a little more expensive than you would like, “pay up a little” and get it anyway. You may feel as though you are overpaying for a while but that won’t make you wrong. “Everybody feels stupid at the top of the bull market, basically.” Everyone feels they should have taken more risk – leveraged their assets a bit more.

What usually happens however is that they capitulate and do just that “just in time to get wiped out... The market, in its own way, must have a lot of fun.” However this is not just about the UK. Housing in most of the world is about as bubbly as it has ever been. In the US, prices as a multiple of family income are now higher than they were in the great housing bubble of 2006 and 2007.

That “in itself is quite amazing”. And remember that when that bubble deflated it took $8trn of “perceived wealth” (“perceived” because the house itself doesn’t change just because its price rises) down with it. The same day of reckoning will come to global markets again. The only thing in the UK’s favour is how slow it is at building houses. Last time round the markets that really cracked – Spain, Ireland and the US – were the ones that built and built. Those that did not (the UK, Australia, and Canada) were not hit so hard.

However, there is little doubt in Grantham’s mind that we won’t escape so lightly this time. With prices up by 13.2% in the year to June (the data is from the Office for National Statistics – see chart) housing inflation is at a 17-year high. When the crash comes to the UK, says Grantham, it will be a “humdinger”.

“There is no margin for error in either equities or fixed income” after the surprising resilience of the US market this year, Abby Joseph Cohen, the long-serving strategist at Goldman Sachs, tells Barron’s.

Cohen has been known for consistent bullishness on stocks during most of her four-decade career at the investment bank, but sounds more cautious today. Much of the recent strength is simply due to the Federal Reserve “using monetary policy … to backstop the equity market”, she suggests. Investors are willing to look past a difficult year in the hope of better times by the end of 2021, but “valuation models suggest that the good news is already priced into the S&P500”.

Goldman Sachs’s analysts have a 12-month target of 3,100 for the S&P 500, so the index is now “bouncing around fair value”. US stocks “performed dramatically better” than the rest of the world over the last few months, which is in part due to a higher weighting to technology, but Europe and Japan may do better over the next six to 12 months.

Cohen’s stock picks for the coming year include a firm that should grow strongly on the back of the Covid-19 crisis: Cintas, which provides services such as cleaning, sanitation and personal protective equipment. She also likes Daikin Industries and Trane Technologies, both of which operate in heating, ventilation and air conditioning. These should benefit from increased concerns about indoor air quality, as well as greater demand for cooling due to climate change.

This crisis may give way to a “lacklustre U-shaped recovery” this year, says Nouriel Roubini, the economist known for predicting the 2007 housing-market crash. But “an L-shaped ‘Greater Depression’ will follow”.

Global debt levels were already perilously high. Now, government spending to tackle the crisis will bring massive deficits. Worsening demographics will maintain the pressure on public finances even after Covid-19.

The loss of income for households and companies will bring rising defaults. Together with huge spare capacity in the economy that will ensure a sluggish recovery and may create deflation. As central banks battle this through unconventional monetary policies that amount to currency debasement, expect stagflation (stagnant growth paired with inflation).

Digital disruption means that income and wealth gaps will widen further. This will combine with fears about supply-chain security to encourage nationalism, populism and xenophobia. The results will include de-globalisation and a backlash against democracy.

The US-China stand-off will mean decoupling in trade, investment, data, technology and monetary arrangements. This diplomatic break-up may usher in a new cold war, fought as cyberwarfare.

Finally, environmental disruption and climate change will wreck havoc – including future pandemics.

These risks,”already looming large before Covid-19 struck”, threaten to sweep “the entire global economy into a decade of despair”.

“The stockmarket won’t wait for things to get better,” reckons Anthony Bolton, the former star manager who ran the Fidelity Special Situations fund for 28 years before retiring in 2007. So investors who are too bearish in a crisis like this risk missing out on the recovery. “‘The question you need to ask yourself is ‘am I happy to buy at today’s prices?’,” he tells Bloomberg. “There is this temptation always to keep waiting to get a better chance. But you might not [get one].” If you think that current valuations are attractive on a long-term view, it’s an “opportunity to buy”, regardless of the short-term economic outlook.

Bolton began investing again at the end of March, he tells the Financial Times, after increasing his cash holdings last year because valuations were stretched. He didn’t disclose what he is buying, but suggested that troubled businesses in key sectors were likely to benefit from state support around the world. “There’s almost an element of governments competing. If we save the [UK] airlines, the Germans are not going to let Lufthansa go bust.”

A high-profile return from retirement in 2010 to run the Fidelity China Special Situations fund ended after four years of lacklustre returns, but Bolton still sees opportunities there: Chinese and emerging-market firms are well placed as they know how to make decisions in fast-moving environments, he tells Investment Week. More broadly, investors should look for management teams that are “flexible and pragmatic” to find firms that will be resilient in this crisis.

Masayoshi Son, founder, SoftBank

Coronavirus “has become a global pandemic, stockmarkets are crashing, credit is getting crunched and [SoftBank’s] share price is down 30%,” says Tim Culpan on Bloomberg. “So of course … Masayoshi Son would announce a share buyback.”

The Japanese billionaire plans to have SoftBank – his sprawling technology conglomerate – buy back up to ¥500bn (£3.9bn) of its shares over the next year.

The timing may seem odd, but Son has been under pressure from shareholders, including US activist Elliott Management, after some recent deals started to look unwise. Son made his name with a $20m stake in a small Chinese e-commerce firm called Alibaba in 2000. When Alibaba listed in 2014, that stake was worth $60bn.

Ever since, investors have viewed him as a tech visionary. But recent investments – including office-rental firm WeWork and ride-hailing service Uber – have left them wondering if hubris is affecting his judgement.

Hence this “face-saving gesture” of a buyback that “marginally addresses shareholders’ demands”, says Christopher Chu in FinanceAsia (it’s still only a quarter of what Elliott wanted). “It is an act of goodwill rather than an inflection point for the company’s investment priorities.”

But Son gets to pretend he’s listening, says Culpan – and while shares could drop further, he will just “wait for the inevitable rebound that will make him seem like a genius”. Don’t be surprised if other tech firms awash with cash – such as Apple – follow his lead and ramp up their own buybacks.

For all the worries about the spread of coronavirus, investors should ignore scary headlines, says Warren Buffett, America’s best-known investor. “Something else will be front and centre, six months from now, a year from now,” he tells Becky Quick on CNBC.

In his latest annual letter to shareholders in Berkshire Hathaway, Buffett’s investment vehicle, the 89-year-old writes that when evaluating how to respond to news events, or sharp falls in stockmarkets, “the real question is: ‘Has the ten-year or 20-year outlook for American businesses changed in the last 24 or 48 hours?’.” Given that you wouldn’t buy or sell your own business simply “on today’s headlines”, why sell shares in good firms?

Buffett also favours equities over bonds. “If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments.”

When asked for his views on the 2020 US presidential election, Buffett – who describes himself as a Democrat, tells Quick that while he agrees with Democratic candidate Bernie Sanders that “we ought to do better by the people who get left behind by our capitalist system, I don’t think we should kill the capitalist system in the process.” Instead, he says, he would support fellow billionaire Mike Bloomberg (pictured).

“Today’s trend-following environment has left Baupost looking flat-footed,” says Seth Klarman, the co-founder of the $29bn hedge fund, in his latest letter to investors. Baupost returned less than 10% in 2019, compared to a gain of 30% for the S&P 500 index.

The shortfall was largely due to its focus on value stocks, which are out of favour to an extent that is exceptional by historical standards. “The relative underperfomance of small cap value has been only more extreme twice in history – in 1929, right before the Great Depression, and in 1999, at the height of the tech bubble.” Klarman blames this in part on the growing influence of passive investing and index funds, and the way that they draw money into a narrow set of companies. “Stocks not included in prominent indices relentlessly lag, while the beneficiaries of such inflows move more or less in tandem, sometimes regardless of diverging fundamentals.”

Yet Baupost has “utter confidence” that a focus on value will pay off, “knowing that the rocket fuel that propelled markets in 2019 will run out”. When it does, the reckoning will be grim for “high-flying and often profitless upstarts” such as Netflix, Uber and Tesla. The failed initial public offering and subsequent bailout of WeWork is a reminder of how abrupt this might be. “Investing is not a sprint but a marathon. Over the long run, major mispricings are eventually corrected ... because short-term illusions are pierced and enduring characteristics become more apparent.”

We are in “an investment environment that is simultaneously attractive and terrifying”, Cheah Cheng Hye, the co-founder of one of Asia’s largest independent fund managers, tells Bloomberg.

Capitalism is in a systemic crisis: too much financial engineering means that we are just borrowing from the future; giant monopolistic companies dominate economies around the world and stifle competition; and monetary policies based on too much liquidity and negative interest rates are contributing to a gulf between a very small, wealthy elite and the majority of people who are seeing no increase in their income. “This is fomenting social crises and unrest all over the world.” And tribal politics are making matters worse, threatening globalisation and free trade.

At the same time we have “bubble economics”. Central-bank money printing is distorting prices and pushing up markets. It’s a dangerous atmosphere – “but one where you still need to keep investing”. Abundant liquidity and “zero tolerance for market failure” by central banks and governments “imply that the party will continue for quite a while”.

So investors should continue to hold equities, including China, where Cheah believes the completion of the first phase of a trade deal with the US will be positive for the renminbi. But since we can never know exactly when the next crisis will hit, it’s prudent to hedge these more aggressive investments by still keeping part of a portfolio in defensive assets, such as gold and cash.

The biggest problem for many attendees at the World Economic Forum in Davos is where to put their money, Martin Gilbert, the outgoing vice chairman of fund manager Standard Life Aberdeen, tells CNBC. Slow growth and low interest rates mean that wealthy individuals are struggling to find attractive investments, just like the rest of us – but they have options that smaller investors lack.

High net-worth individuals and large funds are continuing to shift out of publicly listed investments and into private holdings in sectors such as real estate and various forms of infrastructure, from student housing to airports. Nonetheless, Gilbert says that valuations in most assets still look “reasonable” to him and only government bonds seem too expensive.

Gilbert will leave Standard Life Aberdeen – created through the merger of Aberdeen Asset Management, which he co-founded in 1983, and Standard Life – later this year. He has already taken on a new role as non-executive chairman of Revolut, the fintech start-up that recently completed a new fundraising round valuing it at $5bn (£3.8bn).

Firms such as Revolut – which specialises in areas such as currency exchange but is expected to offer a wider range of services in future – are set for strong growth, Gilbert tells Scottish Business Insider. There should be big profit margins in banking for them to seize, since they are starting from scratch without the overheads of existing banks – although increasing scrutiny from regulators will soon bring added costs.

Climate change is about to trigger “a fundamental reshaping of finance”, says Larry Fink, the chief executive of BlackRock, the world’s largest asset manager. Greatly increased risk of floods or drought poses a threat to “core assumptions” about the way that the modern markets work. “What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in the impacted areas?”

But putting “sustainability at the centre of our investment approach” – as Fink says he now wants to do – may be harder than it sounds for a firm that holds two-thirds of its $7trn of assets in index-tracking funds, says Annie Massa on Bloomberg. BlackRock says that it will start ditching investments such as thermal coal producers from its active funds. However, with trackers, it’s the index compilers such as MSCI who decide what goes into the funds, so changing the holdings will be trickier.

BlackRock will launch further sustainable ETFs and push index providers to create sustainable versions of key indices to provide an alternative. But its most powerful weapon would be its “enormous voting muscle”, says Nils Pratley in The Guardian – that is, backing shareholder resolutions aimed at improving the behaviour of “foot-dragging management”. Here, Fink’s comments are vague, merely saying that the firm will be “increasingly disposed” to do so. That “does not sound like a battle cry”.

Scott Minerd,chief investment officer, Guggenheim Partners

"The slide and collapse in investment-grade credit has begun." That's what veteran investor Scott Minerd broadcast on social-media site Twitter after conglomerate GE saw its bond yields surge last week amid fears that its credit rating could be downgraded to "junk", raising the cost of servicing its $115bn debt pile. Shares in the company once the world's biggest by market value have fallen in value by more than half this year. Yet Minerd thinks GE is just the start. "More investment-grade credits to follow," he warns.

That said, Minerd doesn't expect the Federal Reserve to ease up on its interest rate hikes any time soon. Indeed, he tells Reuters, the Fed could raise interest rates as much as five times next year, unless something drastic happens. In turn, rising rates will continue to buoy up the US dollar, which will also mean emerging markets remain under pressure.

Emerging markets aren't the only trouble spot Minerd is also concerned about Italy's current budget dispute with the European Union (EU). He's speaking from experience. In the early 1990s, he helped Italy to restructure its debt. Now he sees a greater than 50% chance of a "catastrophic" outcome, such as Italy pulling out of the euro, unless the EU allows the Italian government to boost public spending, in exchange for agreeing to use higher tax revenues to pay down its debt. "The scale of the problem if Italy blows up it's really hard to imagine how there's a way to get the genie back in the bottle."

Joseph Stiglitz has joined forces with fellow economists Nouriel Roubini and Kenneth Rogoff in attacking bitcoin. The trio claim that the digital currency will be "regulated into oblivion" as authorities clamp down on money laundering. "You cannot have a means of payment that is based on secrecy when you're trying to create a transparent banking system," Stiglitz tells Financial News. Indeed, "if you open up a hole like bitcoin then all the nefarious activity will go through that hole, and no government can allow that". A major crackdown has not happened yet because the market for cryptocurrencies is still relatively small, but "once it becomes significant they will use the hammer".

However, bitcoin is not the only currency in trouble: "the euro may be approaching another crisis", noted Stiglitz on the Project Syndicate website last month. From 2008 to 2016 the eurozone's real (after-inflation) GDP grew by just 3%. In 2017 it grew by about 2.4%, but it is now "faltering again". The euro "was supposed to bring shared prosperity... [but] has done just the opposite". The trouble is that the system was "almost designed to fail". It "took away governments' main adjustment mechanisms (interest and exchange rates)" while restricting public spending.

Stiglitz believes a common deposit insurance scheme would "prevent runs against banking systems in weak countries". But while Germany's Angela Merkel (pictured) the key power in the eurozone recognises the importance of a banking union, it's apparently "a reform to be undertaken sometime in the future, never mind how much damage is done" now.

Billionaire investor Howard Marks has warned that private-equity companies are currently paying too much for deals, and lowering their standards in doing so, partly because they are finding it so easy to raise money from investors. "When there's too much money around, it creates really bad things," he tells the Financial Times. "You've got to think of the markets like an auction. There is an opportunity to lend money. Who gets to make the loan? The person who will accept the least."

In effect, private-equity groups are under pressure to put investors' money to work. They are also keen to get deals done in order to generate more fees but there just aren't enough worthwhile deals to go around, says Marks. "There is more money than there are good ideas." As a result, "they are paying record-breaking multiples" of earnings for companies, andalso accepting less favourable terms in order to secure the business in the face of tough competition. That could get very ugly when the next downturn comes along, says Marks. "You've got to worry when we are in the tenth year of an economic recovery."

Marks made his money and his reputation by investing in distressed debt, and also foresaw both the dotcom crash in 2000 and the subprime mortgage collapse that led to the financial crisis. It's worth noting that he has been cautious on financial markets for some time, although he has been careful to steer clear of using the word "bubble". In his most recent memo to investors, published in January this year, he noted that "it feels as if we may get through the next 18 months without a recession, but if we do, that'll make this the longest economic recovery since the1850s. Certainly not impossible, but against the odds." As a result, when it comes to investing, he said, "I would favour the defensive or cautious part ofthe spectrum".

Cryptocurrencies may be yet another in a long line of failed attempts to establish new kinds of money, Robert Shiller wrote on the Project Syndicate's website this week. Shiller, a Nobel prize winner who popularised the cyclically-adjusted price/earnings ratio as a measure of market valuation, and is famous for his warnings about both the US housing market and dotcom bubbles, notes that "attempts to reinvent money have a long history".

Examples include Josiah Warner's "Cincinnati Time Store", which opened in 1827. It sold merchandise for "labour notes", which were backed by "units of hours of work". It shut down just three years after it launched. A similar experiment launched in London a couple of years later by social reformer Robert Owen failed, too. During the Great Depression, economist John Pease Norton proposed a "dollar backed not by gold, but by electricity", which also failed.

"Each of these monetary innovations has been coupled with a unique technological story," Shiller notes. "More fundamentally, all are connected with a deep yearning for some kind of revolution in society." Cryptocurrencies are no different, he said. They were introduced by "entrepreneurial cosmopolitans" who "hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war". The air of mystique around these innovations not to mention the fact that the means by which money itself derives its value is nebulous and faith-based also helps the ideas to gain traction, at least in the initial stages. For example, says Shiller, "practically no one, outside of computer science departments, can explain how cryptocurrencies work. That mystery creates an aura of exclusivity." Yet devotees beware. "None of this is new, and, as with past monetary innovations, a seemingly compelling story may not be enough."

Angus Tulloch, who was born in Scotland in 1949, bought his first stock at the age of ten. But he didn't enter the investment business immediately: after studying economics and history at Cambridge he did a variety of jobs, including working as an accountant for the National Bus Company. In 1980 he joined stockbrokers Cazenove and moved to Hong Kong. In 1988 he moved back to Scotland to work for wealth management firm Stewart Ivory (now Stewart Investors). By 1992 he helped set up their emerging-markets business, launching several funds and trusts, most notably the Stewart Investors Asia Pacific Leaders fund, which he managed between December 2003 and July 2016. He retired last year.

What was his strategy?

Tulloch liked well-run firms in an industry with barriers to entry (which should shield them from competition) and that are able to generate strong returns on capital. He avoided investing in countries where he felt investors' rights aren't sufficiently protected, or where there was high political risk.

Did this work?

An investment of £1,000 in Asia Pacific Leaders in December 2003 was worth £5,546 by the time Tulloch stepped down 12 years later, an annual return of 14.6%. The same amount invested in the MSCI Asia ax-Japan index would be worth only £3,790, a much lower return of 11.2% a year.

What were his best trades?

Tulloch invested in Hong Kong-listed beverages firm Vitasoy in the early 1990s. The stock has returned almost 3,700% (an average of over 16% per year) since its initial public offering in 1994. A recent example was India's Mahindra and Mahindra, which he bought in 2012 because he liked its long-term record. It doubled in price over the next four years.

What can investors learn?

Buying well-run firms at reasonable prices and then holding onto them might seem like a very simplistic strategy, but it can be extremely effective, especially when putting money into companies on the other side of the world.If you want to invest abroad, especially in emerging markets, Tulloch's approach of avoiding companies run by dubious characters, or where political uncertainty is high, is a prudent way to minimise risk.

Hugh Young studied politics at the University of Exeter before entering the investment industry. He first worked at MGM Assurance and Fidelity before joining Aberdeen Investment Management in 1985. In 1988, he was put in charge of the Aberdeen Global Asia Pacific Equity Fund, which he still runs. Four years later, he moved to Singapore to set up Aberdeen's Asian office, and has stayed there ever since.

What is his strategy?

Young looks for high-quality companies with a sustainable competitive advantage. He places a great deal of emphasis on good corporate governance and the fair treatment of minority shareholders these are often bigger problems in emerging markets than developed ones. He avoids strategically overambitious or heavily indebted firms.

How well has this worked?

A $1,000 sum invested in the Aberdeen Global Asia Pacific Equity fund at its inception in April 1988 would now be worth $17,200 an annual return of almost exactly 10%. By contrast, the MSCI Asia Pacific Equity index (excluding Japan) has risen 1,038% in three decades, a yearly return of 8.5%. Aberdeen's Asian assets under management rose 200-fold to $75.5bn between 1992 and 2016.

What were his best trades?

In the late 1990s, Young bought into the Indonesian subsidiary of the global goods company Unilever. Over the past two decades, the investment has returned over 12,284% compared with only 770% (both in US dollar terms) for the Jakarta Composite Index. This works out to an annual return of 27.6% for Unilever, as opposed to 11.6% for the Indonesian market. Samsung Electonics, the Korea consumer-goods giant, is another of his winners. It shares have returned a total of 11,162% (also measured in dollar terms) during the same period.

What can investors learn?

Young says that investors need to assess whether a company has the culture and ethos to be a long-term success, instead of just focusing on the numbers. Effective companies are about people working well together, not just assets. Avoid firms that you don't understand or that look too good to be true.

Francisco Garca Params studied economics at the Complutense University of Madrid and completed an MBA at the University of Navarra before joining fund manager Bestinver in 1989. There, he became Spain's most-successful fund manager, delivering annual returns of 16% over 25 years. His record became so important to the firm that its assets under management dropped by 30% when he left in 2014. After a two-year non-compete period expired, he launched his own firm, Cobas Asset Management, in 2017.

What is his strategy?

Params follows the value-investing principles of stock-trading legends such as Benjamin Graham and Warren Buffett. As with Buffett, Params' style has evolved to favour higher-quality firms. "When you're young you want to achieve a quick, high return and you think you can get it with cheap companies, so you avoid quality companies that are more expensive," he told CityWire. "Over time you realise these cheap companies are cheap because they are regular businesses and things can go wrong."

What was his best trade?

At Bestinver, Params' funds often held a stock for a long period of time, but regularly added to or trimmed the size of each investment depending on which holdings seemed cheapest. This makes it difficult to identify how much specific stocks have contributed to his performance. However, when launching Cobas in 2017 he noted that he had seen (and presumably acted on) an "extraordinary opportunity" in miner Anglo American in late 2015, when the shares were trading at roughly 270p. By March 2017, they had recovered to 1,400p.

What can investors learn?

In his book Investing for the Long Term (to be published in English this year), Params sets out a number of pithy principles, including "the more a company appears in the press, the further you should keep away from it" and "the older a company is, the more possibilities it has of surviving". He strongly favours family-controlled firms such as BMW, which has been one of his longest-held investments.

Cheah Cheng Hye dubbed "Goldfinger" and the "Asian Warren Buffett" is the co-founder and chairman of Hong Kong-based Value Partners Group. Born in Malaysia in 1954, he wrote for the Asian Wall Street Journal before becoming head of research and a proprietary trader at Morgan Grenfell in 1989. In 1993, he co-founded Value Partners with $5m in assets under management. The company listed on the Hong Kong stock exchange in 2007.

What is his strategy?

Cheah is an old-fashioned value investor. He uses the "Graham-Dodd" approach to buying stocks, implementing religiously the principles in Benjamin Graham and David Dodd's book Security Analysis referred to as the "bible of value investing". However, he stresses the importance of focusing on cash flow and corporate governance to a greater extent than Graham and Dodd, saying these considerations are crucial in emerging markets. He believes in thorough on-the-ground research: Value Partners makes over 2,500 company visits every year. The firm has grown to $14bn in assets under management and returns have averaged 15% per year. Cheah's total personal compensation in 2016 was $35m, says Forbes.

What were his top trades?

Much of Cheah's success has come from avoiding potential disappointment. When the world was chasing dotcom stocks, for example, Cheah bought none. However, he once invested $30m in Oasis Hong Kong Airlines, only to see the firm go bust withinsix months.

When Chinese carmaker BYD Auto's stock went into free fall, Cheah visited the firm and decided the stock had been unfairly marked down. Value Partners became the second-biggest shareholder in the company. In 2008, Warren Buffett took an interest. Overnight, the world bought in and Value Partners sold out, taking a HK$600m (£55m) profit.

What can investors learn?

Cheah advocates the "stupid- clever" approach. Ego is the investor's biggest enemy: if you think you are stupid, you can do smart things. If you think you are clever, you will do stupid things. You must remove your sense of self from the investment equation.

Government-bond prices have been in decline recently, and as a result the yield on the US ten-year Treasury bond has been rising (yields rise as prices fall). Experienced bond investor Bill Gross of Janus Henderson reckons that we've now seen a turning point. "The 35-year bond bear market is starting to come out of hibernation, waking up and starting to growl." And not before time, he says. The gap between bond yields and nominal GDP growth is far above historical levels. Indeed, while US GDP is growing at as much as 5% a year, ten-year Treasuries are still yielding less than 3%, while UK ten-year yields are only around 1.4%, even though inflation is 3%.

And while US Treasuries are "leading the charge", on speculation that the Federal Reserve may increase interest rates aggressively, the rise in bond prices is the "beginning of a global movement". This is because "other central banks are catching up with the end of quantitative easing". Even the European Central Bank is starting to change its monetary outlook. German bunds, which previously had a negative yield, are starting to rise into positive territory. This is no surprise we should expect bond yields to rise across the world, because history teaches us that "yields on sovereign bonds tend to move together". As a result, investors should consider selling global bonds in general.

Gross also thinks investors should consider a bet against the US dollar (even though it has weakened substantially). He's unimpressed by both President Donald Trump and Treasury Secretary Steve Mnuchin, who "speak with forked tongues telling the market what they think it wants to hear". Trump's tax cuts have also expanded the deficit. But Gross is less worried about stocks central banks' obsession with asset prices suggests they will intervene if markets fall.

Jack Dreyfus was born in 1913 in Montgomery, Alabama. After graduating from Lehigh University in Pennsylvania he worked on Wall Street in relatively junior positions until a friend loaned him the money to buy a seat on the New York Stock Exchange. His brokerage boomed, boosted by aggressive advertising, and in 1951 he took over the small Nesbett Fund, changing its name to Dreyfus. He ran it until 1965, before selling in 1970. He died in 2009 at the age of 95.

What was his strategy?

Dreyfus was a market timer and adopted a "contrarian" strategy that put the majority of his funds' assets into stocks during times of great pessimism and converted money into cash during times of great optimism.

Did this work?

Between 1953 and 1964 the Dreyfus fund returned a total of 604% (19.4% a year), compared with 346% (14.6%) for the Dow. Not only was it the best-performing mutual fund, but its returns were 102% higher than the fund that came in second place. He retired in 1970 with a personal fortune that was estimated at $100m (around $610m in today's money).

What were his biggest successes?

In early 1957 Dreyfus became convinced speculators in stocks were overextended, and had borrowed huge sums of money they wouldn't be able to repay. He cut his fund's holdings of stock to less than half. Dreyfus was therefore shielded from the effects of the bear market that saw the value of the Dow plunge by 20% in the three months from July to October of that year.

What lessons are there for investors?

Predicting market rises and falls is difficult, and most ordinary investors would be better off taking a "buy and hold" strategy, especially since stocks almost always do better than bonds, over the medium and long-terms. Still, Dreyfus shows that going against the crowd can be a powerful strategy.

Jamie Dimon, the chief executive of investment bank JP Morgan Chase, is a big fan of the blockchain his bank is even investing in the technology, with the hope that it could save money on trading costs in the long run. However, he is definitely not a fan of bitcoin, the digital currency powered by blockchain. Indeed, he says that if he finds any of his traders betting on bitcoin, he will "fire them For two reasons: it's against our rules, and they're stupid."

Dimon admits that those who have invested in it so far have been very successful even his daughter "has made a lot of money investing in it, and now she thinks that she's some sort of genius". He's also not suggesting that you follow people like Jim Chanos, a famed short seller and investment manager, who has actively shorted it. He does think however that bitcoin, and similar cryptocurrencies, have become so overvalued that the mania can be compared to the "tulip fever of the 17th century".

Sure, he says, "you might be better off using bitcoin if you live in countries like Venezuela, North Korea or Ecuador", but this isn't the case in stable countries such as the US "where its only use is for speculation". Also, since "having a national currency is one of the basic roles of a government", countries around the world will fight hard against any perceived competition. Indeed, China has recently introduced new measures to restrict the use of cryptocurrencies. Expect to see more of this: "just you wait until someone gets hurt, or it is used for illegal purposes, they'll start really cracking down on it". Eventually, bitcoin will be "the emperor without clothes".

Who is he?

James Simons was born in Massachusetts in 1938. He studied mathematics at MIT and University of California, Berkeley, then worked at the National Security Agency. He left that role in 1968 after publishing a letter criticising the Vietnam War, then became the head of mathematics at Stony Brook University. He started the hedge fund Monemetrics in 1978, initially to trade currencies. In 1982 he renamed the fund Renaissance Technologies and focused on quantitative models.

What was his strategy?

Renaissance employs a huge number of mathematicians who aim to spot anomalies in the stockmarket and devise computer programs that will execute a large number of trades very quickly to take advantage of them. It has been extremely secretive about its exact strategies, refusing to disclose them even to regulators, arguing that this would destroy its competitive advantage. However, there has been speculation that Medallion, the flagship fund, may make much of its money from high-frequency strategies that predict when a big institutional share order is about to push up the price of a stock.

Did this work?

Between 1989 and 2016 Medallion, which is now only open to Renaissance employees, has returned just under 40% a year after fees (and 98% during the crisis of 2008). One thousand dollars invested in the fund at inception would have been worth $13,781,000 in 2016. Renaissance's other funds haven't had such spectacular success, but Renaissance has built up around $65bn of assets under management. Simons, who retired from the firm in 2009, has a personal fortune estimated at $18bn.

What were his biggest successes?

Simons has revealed that one model that the firm used successfully was based on a correlation between weather data and daily stockmarket returns. The market did very slightly better on sunny days, especially in Paris. By using leverage (borrowed money), Renaissance was able to produce large profits from this. The 15-minute difference between the closing time for S&P 500 futures and options trading was the source of another profitable anomaly.

What lessons are there for investors?

There are still many stockmarket anomalies although you may need a large amount of computer power and expertise to exploit them. However, the difference in returns between Medallion and the other Renaissance funds shows how top fund managers restrict access to their best opportunities

"As climate change has become increasingly problematic... the investment community is starting to pay attention to the investment risks it poses," says Jeremy Grantham of US fund manager GMO. The good news is that "you don't have to sacrifice returns in order to invest in companies helping the world address climate change". Prices for many firms in the sector look reasonable relative to their prospects. "Despite strong growth projections, the climate-change sector has generally been trading in line with the broad equity market."

While US president Donald Trump's decision to pull America out of the Paris Agreement was seen as a big blow for the sector, "climate change is a global problem... and rather than wavering on their promises, other countries have instead rallied together to reaffirm their commitments". For example, "Germany, France, China, India and others are setting goals to eliminate internal combustion engine vehicle sales within the next two decades or so, and many countries are targeting dramatic increases in renewable energy capacity".

In any case, public subsidies are just the "icing on the cake". Even without subsidies, "we are approaching an inflection point where clean energy solutions will be cheaper than conventional alternatives". Indeed, "various projections indicate that electric vehicles will be cheaper than internal combustion engine vehicles within five to ten years", making them "an economic no-brainer". This, alongside "a growing global awareness of the magnitude of the problem we're up against, will support secular growth in the climate-change sector for decades to come".

Who was he?

Leon Levy was born in 1925 in Manhattan. He studied psychology at City College of New York (CCNY), although his grades were too low to join the advanced securities analysis course. He served in the US Army, then joined Hirsch & Company as a research analyst in 1948. In 1950 he left to help a colleague, Max Oppenheimer, set up on his own. Levy became a managing partner in 1959, and helped Oppenheimer grow into a successful mutual fund firm, before it was sold in 1982 for $165m. Levy then set up hedge fund Odyssey Partners with Jack Nash. They ran it for 15 years, until he retired in 1997.

What was his strategy?

As a contrarian, Levy invested in companies that he felt were undervalued. In some cases he sought out the shares and bonds of companies that were in bankruptcy proceedings, betting that they would either survive the process or that sufficient value would be left after the liquidation to make it worthwhile. After he retired, he made $100m by short-selling the tech-heavy Nasdaq index at the peak of the dotcom bubble.

Did this work?

From 1982 to 1997, Odyssey returned an annual average of 22% (turning $10,000 into $794,175) versus 16.9% for the market. The fund grew to have assets of around $3bn ($4.5bn today), compared with $50m on launch. Levy's own fortune was put at $750m just before his death in 2003, despite extensive philanthropic donations, including a $100m gift to Bard College.

What were his biggest successes?

While at Hirsch, Levy bought Pacific Western Oil and Jefferson Lake Sulfur, noting that both stocks had seen significant purchases by directors. His profits from these deals brought him to Oppenheimer's attention. In 1983 Odyssey Partners made headlines when it bought a stake in the parent company of a bankrupt railroad. Levy rightly believed that high energy prices would boost demand for coal (and thus rail freight). Meanwhile, the sale of the railroad's undervalued timberland and real-estate assets delivered a $200m profit for Odyssey.

What lessons are there for investors?

Levy's record shows that it often pays to bet against the crowd, and that academic ability (or lack of it) is not always a bar to success thanks to his success on Wall Street, he was invited to return to CCNY as a guest teacher.

The former chancellor of the exchequer,Alistair Darling, was widely considered a colourless and unobtrusive member of the last Labour government. But he certainly made waves in the summer of 2008, when he said that the economic outlook was "arguably the worst" it had been in 60 years. And the downswing, he reckoned, would be "more profound and long-lasting than people thought".

He was bang on the money then, of course, and he isn't exactly brimming with optimism now either. A key worry is the high and ever-rising level of consumer debt accumulated in the past few years. He thinks that this, along with the uncertainty generated by Brexit, should be triggering "alarm bells".

When interest rates rise, "and they will go up, if not this year then certainly next year, and suddenly people find they are going to be paying more in their monthly payments, that's when you need to watch out". On the plus side, banks are "much better capitalised" and regulators are also "far more sharp and ready to intervene than they were ten years ago".

It's just as well they are more vigilant now, adds Darling, because we learnt ten years ago that "something that can start as apparently a small ripple in the water can become mountainous seas very quickly." The endless euro crisis also holds an important lesson for regulators. One of the reasons state action during the financial crisis worked was "because we did far more than people expected and we did it far more quickly than people expected", he says. The endless faffing around over Greece suggests that, "if you want to really put a firewall up, you've got to do something quite drastic".

Daniel Loeb was born in Santa Monica, California, in December 1961. He gained a degree in economics from Columbia University, by which time he had been trading stocks for years. At one stage he made $120,000 before losing it all with a disastrous investment in a medical technology company whose respirators were responsible for several patient deaths. After a decade on Wall Street he set up his own hedge fund, Third Point Management, in 1995.

What is his strategy?

Loeb is known as an activist investor. He buys stakes in companies that he thinks could be better run and demands they make changes, hoping that the subsequent improvement in performance will boost the share price and enable him to sell at a profit. He is particularly well known for writing aggressive letters to company bosses and then leaking them to the press in the hope that the publicity will force them to take his advice. However, some of his investments follow a more conventional value approach of buying undervalued companies that already have good management teams.

Does this work?

Between the end of 1996 and 2016, Third Point Management has produced average returns of more than 16% a year compared with only 7.3% for the S&P 500. The assets under management have grown from $3.3m to $17.5bn. Loeb reckons he has made over $12bn for his investors over the years.

What were his biggest successes?

Loeb bought 5% of beleaguered tech firm Yahoo in 2011. Having insisted on fresh thinking at the top, he then discovered that the new CEO, Scott Thompson, was exaggerating his credentials, forcing him to step down. Thompson's successor took Loeb's advice, selling its stake in the Chinese tech giant Alibaba, and using the cash to buy back its own shares. This caused its share price to double to $28 by 2013, enabling Loeb to make a $1bn profit on the deal.

What lessons are there for investors?

Loeb is not the only activist investor to reap outsized returns. The average investor is unlikely to able to persuade the companies they invest in to make changes, but buying shares in companies targeted by activists can be profitable. A recent study by Capital IQ of more than 1,200 activist campaigns found that if you had invested only in these firms, you would have beaten the market by an average of 8.2%. There are even several ETFs that automatically do this for you.

Howard Marks of Oaktree Capital is not a fan of cryptocurrencies. He can see that the digital currencies "have arisen from the intersection of doubts about financial security that grew out of the financial crisis, and the comfort felt by millennials regarding all things virtual". He also acknowledges that "some people are eager to speculate on digital currency for profit" while "others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out". However, "nobody has been able to make sense" of these currencies.

Given that "the price of bitcoin has more than doubled since the start of the year", can it really be considered a medium of exchange or store of value rather than just "the subject of a speculative mania"? Another sure sign that it is overhyped can be seen in the fact that the outstanding bitcoins and ethers (another cryptocurrency) in circulations are combined "worth more than PayPal and almost as much as Goldman Sachs". While times are good, the coins may work. "But their performance in bad times is far from dependable."

"Digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it." That's nothing new just look at the "Tulip mania that peaked in 1637, the South Sea Bubble (1720) and the Internet Bubble (1999-2000)". What's more worrying is that "the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naivety, willing risk-taking and wishful thinking".

Born in 1956 in Raleigh, North Carolina, Louis Bacon became interested in markets after captaining a sports fishing boat for broker Walter Frank. After his degree, he went on to do an MBA at Columbia. After a trainee programme at Bankers' Trust, a US banking organisation, he took a variety of Wall Street jobs, before settling down at Shearson Lehman. There he rose to the rank of vice president, before setting up his own Remington Trading Partners, in 1987. Two years later he founded his hedge fund, Moore Capital Management, which he still runs today.

What is his strategy?

Bacon's style is known as "global macro", meaning he makes large bets on the direction of a wide range of assets, primarily bonds, currencies and commodities. Bacon focuses on changing macroeconomic conditions, attempting to anticipate the behaviour of central banks. Key to his approach is strict risk management: he closes losing trades after only a few days. Most of Moore Capital's money is now managed by traders employed by the fund, but Bacon himself personally trades with several billion dollars.

Did this work?

Despite suffering a reversal in 1994 that caused investors to withdraw nearly 90% of their money, Moore Capital made returns of nearly 19% a year between 1989 and 2012 compared with just over 9% for the S&P 500 as a whole. Returns haven't been as strong over the past five years, but the fund still manages $13.5bn worth of assets. Thanks to fees, which at one point reached 3% of assets and 25% of profits, Bacon's personal fortune has been estimated at $1.7bn by Forbes magazine.

What were his biggest successes?

In 1987 Bacon made a huge amount of money taking short positions on global indices just before the October crash. He repeated the trick with Japanese stocks in 1990. The same year he bet oil prices would soar, which indeed they did after Iraq invaded Kuwait. Moore Capital made an 86% return in 1990. Bacon also sold a large number of the fund's tech shares in March 2000, at the peak of the dotcom bubble.

What lessons are there for investors?

It is possible to make a fortune through short-term trading, but it involves a lot of risk and effort (Moore is a noted workaholic). Also, it is hard for funds that grow beyond a certain size to continue to make large returns, even if they have done well in the past. The best time to invest in a fund may be in its infancy, though it is hard to spot those that will be a success.

Platt was born in Preston in 1968. He began investing while at school, starting with the newly privatised utilities. In 1991, he graduated with a degree in maths and economics from the LSE, and joined JP Morgan as a trader. In 2000 he founded the BlueCrest hedge fund with William Reeves. In 2015, he returned his investors' money. BlueCrest became a family office.

What is his strategy?

Platt splits BlueCrest's assets between systematic strategies (based on pattern-spotting computer algorithms) and discretionary (human-driven) trades. The systematic trades are generally trend-following strategies basically, buying assets that are going up, and selling ones that are falling. He delegates the day-to-day management to his traders, but retains overall control. He believes in aggressive stop losses he will cut traders' allocations drastically if they lose as little as 3% of their capital, but will also lift allocations to winning trades.

Does it work?

Between 2000 and early 2012, BlueCrest returned an average of 14% a year for investors, compared with 3% for the market. At its peak in 2013, assets under management reached $35bn. However, a relatively subdued performance during 2013 and 2014 saw this fall to $8bn shortly before it closed to external investors. Last year it returned 50%, thanks to a decision to increase the leverage (investing with borrowed money) it employs. Platt's net worth has been estimated at $4.5bn.

What were his biggest successes?

In August 2007, spiking interest rates and the huge debts on banks' balance sheets convinced Platt that a stock market crash lay ahead. He sold his bank shares, and bought safe' sovereign bonds. As a result, he both avoided the worst of the financial crisis, and profited from the resulting "flight to quality" and plunge in interest rates (as rates fall, bond prices rise).

What lessons are there for investors?

Risk management is key to successful short-term trading. Strict stop losses limit your downside, vital when using lots of leverage. Platt argues that sustaining large losses can make traders gun-shy, leading to lost opportunities. Because markets have a lot of short-term momentum, selling losers and building up winners can be a good way to boost returns. However, that involves doing many individual trades, which eats up time, can be hard on the nerves, and also raises transaction costs greatly. That makes this a very risky strategy for private investors.

Mark Barnett graduated from the University of Reading in 1992 and joined Mercury Asset Management. He moved to Invesco four years later and made his debut as a fund manager in 1999, when he took over the reins of Perpetual Income and Growth Investment Trust. Between 2003 and 2017 he was also the lead manager of the Keystone Investment Trust. He succeeded Neil Woodford as the lead manager of Invesco Perpetual Income and Invesco Perpetual High Income in 2014, when Woodford left to set up his own firm.

What is his strategy?

As an income investor, Mark Barnett focuses on firms paying relatively high levels of dividends. However, this isn't a case of simply picking those with the highest yield, since it's crucial to make sure that firms can keep paying out. Barnett also looks for companies with strong balance sheets, resilient earnings and the potential to increase dividend payments. As well as ensuring a steady stream of dividends, this allows them to keep growing during tougher economic times and allows them the potential for capital gains as well as income.

Did this work?

The Perpetual Income and Growth Investment Trust, which Barnett has continued to manage, has returned a total of 500% over the past 17.5 years. This is equivalent to an annual return of 10.17% double the return provided by the FTSE 100 during the same period. His track record as manager of the Keystone Investment Trust was similarly exceptional: under his management it returned 12.9% per year over 14 years. This was far better than the FTSE, which returned only 8.3% per year.

What were his biggest successes?

In the spring of 2008, Barnett invested in Provident Financial Group, believing that the high yield offered by Britain's largest subprime lender made it a value bet. He also believed that its past experience in this sector, as well as its focus on home collections, meant that it was likely to survive the fallout from the economic crisis, just as it had survived past downturns. His confidence was amply rewarded since, despite the recent fall in its price, it has returned 407% over the past nine years, after taking dividends into account an annual return of nearly 20%.

What lessons are there for investors?

Dividends are a large component of stock returns, as well as being the ultimate source of a company's valuation. Looking for stocks that can consistently grow dividends, as well as delivering capital gains, is one route to earning higher returns.

Kyle Bass, founder and principal investor of hedge fund Hayman Capital Management, is a long-term bear on China. Chinese banks have been "systematically reckless", building up vast amounts of debt. Now they are trying to boost their deposits, but they are "running to stand still" while domestic bank deposits grew by $3trn over the past year, debt rose by $6.5trn. Those who think that Beijing can handle this painlessly have been taken in by the "supposed omnipotence of the Chinese Communist Party".

If Chinese bank debt represents a "smouldering fire", Donald Trump's administration could see it turn into a full-blown conflagration. All of the US president's main advisers "have been saying that China has been getting the best of the US". As a result, Bass expects America to impose tariffs, perhaps "as high as 45%". If this happens, "then China has a plan for response", which could eventually turn into a physical battle, possibly in the South China Sea. History shows that "all military conflicts are rooted in economics".

China is between a "rock and a hard place", as its dreams of the yuan becoming the world's reserve currency conflict with what needs to be done to resolve the current crisis. Beijing is already heavily restricting capital outflows, yet if the government is forced to recapitalise China's banking system, the yuan will plummet. As a result, Bass is currently short the Chinese currency, and he believes that any Chinese recession will prompt a "race to the bottom" in Asia. It will also have major global implications around 100 countries "have China as their largest single trading partner".

Marc Faber, investor and author of the Gloom, Boom & Doom Report, remains very bearish. He reckons we could be heading for "an epic decline in asset prices after eight-plus years of bull markets", which have left valuations at historically high levels. Another warning sign is that recent gains in most major indices, especially the Nasdaq in the US, have been "driven by a small number of stocks".

The market's dependence on the strong performance of a few stars is particularly worrying given that many well-known technology companies, including Amazon, Netflix and Apple, experienced hefty falls at the start of this month. Even if this was just a "correction", there has clearly been a jump in volatility. One way or another, "when things finally start going down, they'll go down a lot", says Faber.

He is also worried about political risk. Over the past 30 years "an increasing share of wealth has gone to big corporations and wealthy individuals". This will lead to demands for either "a big hike in taxes" or "policies that will lead to a big asset-price deflation". The problem is compounded by the fact that both governments and companies are hiding their true debt levels by deliberately underfunding pensions obligations. In the case of companies, they are using the money to buy back shares instead.

Yet central banks are likely to try to delay the day of reckoning by printing even more money, meaning that there could even be an initial "lurch to the upside" with "QE99" pushing prices even higher. However, Faber is sure that "eventually the system will break". As a result, he stands by his prediction that shares prices are set to fall by up to 40%.

Kyle Bass was born in 1969 and grew up in Dallas, Texas. He studied business at Texas Christian University, graduating in 1992. He briefly worked at the retail broker Prudential Securities, coming top of his training class, before joining the Dallas office of investment bank Bear Stearns in 1994. Despite being in a low-profile part of the bank, he became a managing director three years later. He then left in 2001 to move to Legg Mason, before leaving in December 2005 to set up his hedge fund, Hayman Capital Management, a few months later.

What is his strategy?

Hayman Capital Management looks for opportunities in any market, country or asset class. Over time, Bass's focus has arguably moved from what is usually called an event-driven strategy (focusing on company-specific events) to something closer to a global macro strategy (focusing on countries). This reflects his views that private debt from the financial crisis has been shifted onto public balance sheets since 2008. However, Bass emphasises that his fund still has significant investments in individual firms, including technology firms.

Did this approach work?

Between 2006 and the start of 2017, Hayman delivered an annual return of 16.5% over 11 years. By contrast, the stockmarket returned 9.4% a year during the same period. However, much of this came in the first three years although the fund returned 26% in 2016. Hayman now has assets of more than $2.2bn, compared with only $10m when it started. Bass's own net worth is unknown, but his 4,000-acre ranch in Texas has recently been listed on the market for around $100m.

What were his biggest successes?

Bass's most famous trade was to buy large amounts of credit default swaps (CDS) on US subprime mortgage securities in the run up to the US financial crisis. Since CDSs are insurance for a security defaulting, this was equivalent to betting against them. The trade made around $500m in profits for Hayman, helping it return over 200% in 2007. He was also one of the first to raise the possibility that Greece would default on its debt.

What lessons are there for investors?

Bass believes investors need to pay more attention to tail risks the chance of significant losses or gains (hence his willingness to make long-shot bets such as his subprime position). Many of his positions involve making bets on currencies or government bonds and he thinks you need to have a grasp of what policymakers are thinking and what motivates them.