Abdulaziz A. Alnaim, Managing Partner of Mayar Capital Advisors, offers a very unique perspective on the relationship between understanding risk and generating ROI. In an exclusive conversation with The Manual of Ideas, he discusses overall market efficiency, despite challenges with institutional ownership or pressures to beat the market on a short-term basis.
In the interview highlight below, Abdulaziz explores how the market is rational in providing higher returns to value investors who are willing to take on career risks with long-term portfolio goals. These words of wisdom particularly stand out:
The portfolio manager thinking about next quarter’s results is being perfectly rational given his or her incentives and the risks that he or she is facing. The average portfolio manager has a risk that they are not willing to accept of getting fired if they don’t have a good quarter or a good couple of years…If you are generally not bothered by short-term volatility, you’re willing to take the risk that the average portfolio manager is not willing to take and the market is compensating you for taking that risk.