Jack be nimble…

I frequently read the word ‘nimble’ being used as an adjective to describe apparently desirable investment products. I just read it in a quote from a Portugese investment adviser, so this is not a UK specific trend, even if it is the English language.

The implication is that such funds will do better because they swap assets around quickly as a reaction to global events, financial or otherwise.

I am sorry to say that the idea of an investment fund being nimble is about as sensible as the idea of an oil tanker being nimble and being steered like a speedboat. It is nonsense.

What does ‘nimble’ mean? Well as implied by the heading I think of the word in the context of the children’s rhyme – ‘Jack be nimble, Jack, be quick, Jack jumped over the candle stick’ (referenced obscurely in that all time classic song, American Pie). So I take that to be pretty athletic!

Agile, quick moving, lively and so on come up in the dictionary.

Investment is a long term process. Investment funds are run to stated objectives and mostly against benchmarks which must be published. So they are typically only ever going to make small changes to their holdings in the very short term. Even if a multi asset fund reacts to say an interest rate change that was unexpected, the most it is likely to do is shave a few percentage points off an asset allocation and add the same somewhere else.

So if you get told that XYZ investment is selected because the manager is nimble, assume that the adviser has seen him or her on the dance floor! A fund that is flexible and relatively unconstrained in its asset allocation may be a good idea but calling it nimble is implying alacrity followed by bold, speedy changes of direction, when you are more likely to get a bit of ‘left hand down a bit’. Nimble it will never be!

As an aside, advisers often talk of ‘nimble’ funds at the same time as they are shoe horning clients into multi asset funds with very specific asset mixes that won’t change and yet are simultaneously selling out of a custom built portfolio where with some effort, reasonably prompt changes of asset mix could be made – not nimble, but at least purposeful. Smoke and mirrors.