John Husselbee

Winning by not losing: parking the fund management bus

John Husselbee

Football fans are familiar with the expression “parking the bus”. It was originally used by the then Chelsea manager Jose Mourinho to criticise Spurs’ defensive approach to a game in 2004 and has since become a common description of a team focused more on protecting their own goal than trying to score. 

Parking the bus is typically seen as a derogatory term and has been used as a stick to beat Mourinho many times since as his teams have frustrated more attack-minded opponents. His advocates, however, point to how such a defensive mindset has been the bedrock of many title-winning campaigns.

In fund management terms, we see parking the bus as a positive expression. This means we focus as much on limiting losses as we do on producing gains across our multi-asset portfolios, which can be seen in how we have performed during some of the bigger market sell-offs of recent years. In mid-2015, for example, when markets fell on fears that China’s growth figures might be far lower than predicted, the FTSE 100 Index dropped 12.3% in total return terms from 12 June to 24 August. In contrast, our Risk Grade 4 portfolio – which has around 55% in equities, 30% in bonds and the remainder in alternatives and cash – fell 5.4%.

Winning by not losing: parking the fund management bus

Discrete performance (%):  12 months ending






Liontrust Risk Grade 4






Source: Lipper, Liontrust, to 30.09.17. Past performance is not a guide to future performance.

Looking at a more serious decline in markets, the FTSE 100 was down 16.9% at the height of the eurozone crisis from 7 July to 10 August 2011; again, in contrast, our Risk Grade 4 portfolio fell 4.7% over this period.

The effect of compounding returns delivered through the winning by not losing approach is demonstrated by what happens if people panic in the event of large falls in the FTSE 100 and sell out of what are designed and run as long-term portfolios.

Looking at our Risk Grade 4 once again, £100,000 invested – and most importantly left invested – from 30 June 2011 to the end of December 2016 would have returned just over 50% and be worth £151,201.

This changes drastically if investors had lost heart amid some of the market downturns during this period. As the chart below shows, if they had sold their investments on four occasions when the FTSE 100 fell sharply – 10 August 2011, 24 June 2013, 15 December 2014 and 24 August 2015 – and only bought back when the Index got back to its previous high, this would have reduced the return by more than 50% and be worth £121,740.

Winning by not losing: parking the fund management bus

Source: Lipper/Liontrust. For illustration purposes, the chart shows Liontrust WSS Risk Grade 4 from 30.06.11 to 31.12.16. Market timing assumes the portfolio is sold when the FTSE 100 has fallen sharply (10 August 2011, 24 June 2013, 15 December 2014 and 24 August 2015) and reinvested when the Index has returned to previous high. Past performance is not a guide to future returns.

Without delving too deeply into behavioural psychology, there is a common trait among people known as loss aversion that feeds into this. Put simply, people tend to prefer avoiding losses than acquiring gains and the pain of losing £1 is generally seen as more powerful that the pleasure of winning £1.

A famous experiment illustrates this point, where subjects are offered two gambles with identical payoffs, but framed differently. In the first, a coin is flipped and if it lands heads the person gets £100; if tails, they get nothing. In the second gamble, the person is given £100 first and then flips the coin: if it lands heads, they owe nothing; if tails, they pay back the £100. Subjects tend to dislike the second experiment much more than the first even though the gains and losses are identical.

Ultimately, the evidence of history points to the importance of investing for the long term and staying invested through the ups and downs of markets and political events. Winning by not losing over a long period, rather than chasing gains and fleeing losses, has proved a good way of building performance towards meeting financial goals.


• This content contains information and analysis that is believed to be accurate at the date of publication but is subject to change without notice. Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness. Some parts/sections of this content may been compiled from external sources. Whilst these sources are believed to be reliable, the information has not been independently verified and therefore no representation is made as to its accuracy or completeness. • It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. • Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term. • Any decision to invest should be always based on the final Prospectus and Key Investor Information Documents (KIIDs) and you should take independent legal advice if necessary. These documents contain important information which should be read before investing in any fund and they can be obtained, free of charge, here.

• Any performance shown represents model portfolios which are periodically restructured and/or rebalanced. Actual returns may vary from the model returns.  There is no certainty the investment objectives of the portfolio will actually be achieved and no warranty or representation is given to this effect.  The portfolio therefore should be considered as a medium to long-term investment.

Friday, November 24, 2017, 7:34 AM