"Don't play roulette with fate": Andrei Movchan's investment rules

Andrey Movchan is a well-known economist and investment manager. In the past Executive Director of Troika Dialog, founder and Chairman of the Management Board of Renaissance Investment Management Group with more than $7 billion in assets under management; founder of the investment company Third Rome. Author of the books Russia in the Post-Truth Era, Cursed Economies, English Diary, as well as numerous articles and lectures on economics and finance.

Now he is the founder of a group of investment management companies Movchan's Group. Andrey Movchan answered Oninvest's questions about investment rules;

What are you investing in and why this particular one?

I have added a whole family of conservative products to my company Movchans Group - market-neutral strategies, arbitrage strategies, fixed income. I believe that risky products are always a lottery. It is difficult to apply knowledge in them, and if you can, it is only in certain areas where you need to have special knowledge, which I do not have;

Do you remember your first investment? How did it go?

In the late 90s, I invested in Russian small caps (small capitalization companies). At the time, anything that didn't go bankrupt was growing, and I was making good money. Although some investments went to zero, like Kuznetsk Metallurgical Plant. It just went bankrupt and disappeared;

What would you definitely not buy again?

I would definitely not buy individual stocks and alternative products such as, for example, specific complex leveraged products on real estate or art derivatives. My practice shows that these are very dangerous instruments in which you can lose a lot. 

Who do you trust when making decisions?

To his portfolio managers, first and foremost. And myself. I try to study investments carefully and a lot. And I have experience;

Which investment has pleasantly surprised you?

I invest not to be surprised, but to earn a stable, not too high income. And surprise means that I did not think well, did not fully understand how it should work. Surprise in both bad and good ways is equally dangerous for a portfolio manager - either you understand what you are doing or you don't.  

When was the last time you made a mistake - and what did you learn from it?

I make mistakes all the time, the big funds we manage have hundreds of investments and mistakes happen regularly. We make one or two big mistakes a year and a dozen small ones. But our system of risk control and diversification allows us to show stable results;

Are you more about strategy or intuition? Why?

Certainly about strategy. Intuition is no substitute for information. In the world of investing, intuition does not work well;

Buffett is a handsome man?

Sure, he's handsome, but not because he's a brilliant investor. It is because he was one of the first to understand how investments should have been made in the times when he was making investments. And he built a structure that allowed him to be very successful. Buffett outperformed the index pretty well until the beginning of this century, and since the beginning of this century, he's been underperforming the index. His fame is based on having lots of cheap money, negotiating with governments, and making his money during the years when markets were inefficient. 

What does an investor fear when the screen goes out?

I'm not afraid of anything;

What pisses you off the most in the investment environment?

What's infuriating is the sheer number of myths. There are far more of them than in a deeply religious medieval country. And what is infuriating is the aggression of people who, not knowing how to invest themselves, accidentally earned something and decided that they are great gurus and can attract money from other investors. They are aggressive towards those who approach investments in a systematic way, but shout at every corner about their genius. Although they cannot confirm their results with anything but some inarticulate Excel;

Have you ever been jealous of someone else's briefcase?

Why should I envy someone else's portfolio when I can make a portfolio myself? Do I envy an investor's good fortune? Of course I have. Of course I envied people who were properly invested in bitcoin or major technology companies. I didn't invest in bitcoin and had very limited exposure to technology companies. Those who are lucky are always envious, but that doesn't mean you should try to play roulette with fate;

What did you spend the profits from your most successful deal on?"

On new investments. I invest the profits I make all the time. 

What has to happen for you to cache everything?

More likely serious political instability in the US or a real threat of global war. So far, I do not see either of them;

Do you have guilty pleasure in investing? (For example, "taking crypto overnight").

Check. I like to change currencies in my investments from the dollar to European currencies. I can see that the dollar is walking on an irregular sine wave. And when it seems to me that the dollar is overvalued, I move investments to other currencies, like the pound. And when it seems undervalued, I move back into the dollar. So far I have never made a mistake here. But I will not advise anyone to do as I do, because there is a risk here and sometimes you have to wait a long time for the income to be realized;