Richard Toh is someone for whom 2025 couldn't come soon enough. Toh is CIO at the Singapore-based hedge-fund firm Kenrich Partners.

Let's just say, 2024 was a disastrous year. Not for him, of course — he's a hedge fund manager and earns hefty fees regardless of how well or badly he performs. But it was certainly disastrous for his clients.

Kenrich's flagship Ocular Asia fund currently manages around $50 million — substantially less than it did 12 months ago. By early December it had lost 35.4% since the start of 2024. By contrast, its benchmark of Asian stocks outside Japan was up 8.6% for the year — a performance gap of 44%.

To his great credit, and very unusually for an active money manager, Toh chose to dispense with the usual excuses in a remarkably candid four-page end-of-year letter to investors. Instead, he admitted, the fund's dire performance was purely down to his own incompetence.

"I have come to the realization," he wrote, "that I am not good at what I am doing but I guess some of you may have sensed that already, I am sorry I have let you down.

"I pretty much missed all the major themes in the last two years. I was hopelessly out of sync with the market, buying when I should be selling and selling when I should be buying. We got whipsawed several times this year even as we got some facts correct."

True, Richard Toh is not particularly well known in the asset management world, but he is hugely experienced. According to a bio on the Kenrich website, he has been managing assets since 1989 and used to work for Morgan Stanley.

When asked by the Wall Street Journal for a comment, Toh declined, and it's unclear whether the fund will close. However, in the letter, he says he will return what's left of the capital to investors. He personally plans to take a year to rest and "change the way I look at things".

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*Quotes and pictures are utilized for illustrative purposes only and should not be construed as an endorsement, recommendation, or guarantee of any particular financial product, service, or advisor.

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But it's not just Richard Toh who needs to change his view of things. Most investors can learn from stories such as this. Here are three key takeaways.

1. Experience counts for nothing

The irony is that although a manager needs a very long track record to be able to claim they might be genuinely skillful, experience, on its own, counts for very little. Richard Toh began working in asset management in the year the Berlin Wall came down, and yet he admits that, even now, he's still no good at what he does. And sadly, he's not unusual. As the SPIVA data shows us again and again, most managers underperform most of the time. Indeed, many underperform for their entire careers.

2. Being right means little

It's perfectly possible to get your facts right, as Toh claims he partially did, and yet still perform abysmally. At this time of year especially, we read all sorts of predictions about the economy, politics and the global situation, and doubtless some of them will prove correct. But predicting how markets will respond to whatever 2025 has in store is a different challenge entirely. Most investors, including the professionals, are actually very bad at it.

3. Almost no one admits their own incompetence

Finally, what makes this story so extraordinary is how honest this particular fund manager has been about his limitations. The vast majority of active managers, advisers and consultants who continue to recommend active funds, are either in denial, or, for whatever reason, don't want to be honest about their limitations with their clients or prospects.

If you're ever tempted to use an active manager, always examine their long-term record closely. They may have outperformed for short periods, but was that performance statistically significant? In other words, was it down to genuine, repeatable skill or just plain luck? Do you know, for a fact, that they're any better at what they do than Richard Toh? And, if you're not sure, is this a risk you want, or even, need to be taking?

On that note, I'd like to wish a happy and prosperous new year to all of IFA's clients and to regular consumers of our content. The support you give us by reading our articles, watching our videos and, most of all, sharing our content with others, is hugely appreciated. Together, we really can help to change the way the world invests in 2025.

 

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ROBIN POWELL is IFA's Creative Director. He always works as a freelance journalist and author, and as Editor of The Evidence-Based Investor.

This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product or service. There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal.  Quotes and pictures are utilized for illustrative purposes only and should not be construed as an endorsement, recommendation, or guarangee of any particular financial product, service, or advisor. For more information about Index Fund Advisors, Inc, please review our brochure at https://www.adviserinfo.sec.gov/ or visit www.ifa.com.