Pundit: a person who offers their opinion or commentary on a particular subject area in the mass media
Coach: a person who supports a learner or client in achieving a specific personal or professional goal by providing training and guidance
I happened to sit between a former college basketball coach and a former basketball player at a dinner in Arizona last week. At some point in the conversation, the former player asked how we view our role in the UBS Chief Investment Office, which gave me a chance to use a metaphor I've been thinking about for a while: coaches vs. pundits.
My response: We're coaches first and pundits second. Here's why: If you want to win a football game, you should hire Nick Saban or Bill Belichick. If you want to win a basketball game, hire Mike Krzyzewski or Pat Summitt. Great coaches know how to prepare and train a team, formulate an adaptive game plan, and put the right staff around them to drive success. They spend little to no time trying to predict the future, but they know exactly what they will do in every potential game situation based on data-driven analysis. They're also usually terrible interviews and perhaps a little bit paranoid. They prepare relentlessly. Certainly, no one would say that great coaches would be comfortable leaving anything to luck.
On the other hand, pundits are mainly entertainment. Will the Warriors beat the Raptors in game 5? Will Tiger or Brooks win the US Open? How many home runs will Mike Trout hit this season? These questions fill countless hours of sports radio and TV. They're also a lot more fun to listen to than travel schedules, workout tapering, and quantitative analysis of play calling. They are great at what they do, but I wouldn't hire Colin Cowherd or Stephen A. Smith to run a team.
In the CIO office, we have to be both coaches and pundits, but we're coaches first and pundits second. Our primary focus is on our clients and making sure they are successful in reaching their financial goals and objectives. This means writing about appropriate savings and spending rates, tax management, selecting the right asset allocation, rebalancing, and how to respond to various market scenarios. We directly manage investment portfolios with billions of dollars in assets. That's a role for a coach, not a pundit. When the buzzer sounds, we want to have won the game for our investors. That's all that matters.
Secondarily, we're frequently asked to handicap potential economic or market outcomes. That's where the punditry comes into play. Will we have a hard Brexit? Will the Fed raise or lower rates? Where will the S&P 500 end the year? We're able to comment on these issues as a byproduct of our work. Just like Nick Saban's staff likely knows the estimated yardage and distribution of outcomes from any particular play, we have probabilities and associated outcomes for a wide range of market events and asset classes. We share our work; they usually don't. But what's important is that the coaching role comes first and remains the focus. Be wary if your coach becomes a pundit.
Michael Crook, Head Americas Investment Strategy, UBS Financial Services Inc. (UBS FS)