Attaining Performance Excellence In Hedge Funds

By Paul Berry


What could a portfolio manager, a neurosurgeon and a military fighter-pilot possibly have in common? Well, they all work in high-performance professions where competition to enter is intense, with few enjoying success. The jobs are highly demanding, often encroaching into one’s personal life and the consequences of failure are significant.

Christiano Ronaldo – hones his freekick
technique through practice

Yet there are many lamentable contrasts between the investment world and these other professions. A sole focus on alpha is analogous to Christiano Ronaldo being told he must score a hat-trick every weekend, and that being the full extent of the processes used to improve his performances. Much can be learned from elite performers in other fields as to how they achieve the outcomes they desire.

The last two decades have seen an explosion of research seeking to understand elite athletic performance. Such studies have comprehensively assessed the performances of Gold medallist Olympians, as well as other professional sportspeople. In an attempt to provide additional insight, sport psychology has expanded its area of exploration into fields as disparate as the military, performing arts, music and medical surgery.

Findings have consistently shown that those who excel display superior commitment, confidence, quality practice, focus, positive attitudes, ability to control emotions and thoughts, performance evaluation, use of imagery and planning. Orlick and Partington described these characteristics as “mental links to excellence.” Indeed, these factors conceptualise the essence of performance excellence. Incorporating such practices and thought processes into one’s daily life is key to cultivating excellence. I now explore some of these in more depth.



You can forget everything hereafter if you are you not committed to excelling. This involves self-discipline and dedication, and is a function of how you view yourself and of your values. Central to commitment is high personal standards. As a fighter-pilot told me;

“Sortie report forms…they don’t often write ‘you’re amazing,’ most of the time it’s ‘dude we need to make this better, that shot was invalid.’ You need to have that resilience to go ‘yeah I need to do that better, I need to work on this’ and try to do it better the next day because you want to be better.”

Personal standards are about being the best you can be, taking personal responsibility, not blaming others, being consistent in your approach to your work. Becoming excellent is effortful, requiring a great deal of resilience and motivation, both of which are supported by commitment.



“Sometimes wrong, never in doubt”

This quote, often said of surgeons, depicts how important self-belief is to achieving excellence. Surgeons cannot allow self-doubt to infiltrate their thinking, even in the face of challenging, ambiguous surgery. Indeed, this is probably the most important psychological ability pertinent to elite-performance. My own research with fighter-pilots found self-belief to be the result of specific psychological skills. Self-belief is not synonymous with self-esteem, and so I am not talking about the trader who believes all profitable trades were of his making and unprofitable ones not his responsibility (self-attribution bias in behavioural finance parlance). Self-belief is about self-efficacy; the extent to which you feel capable of overcoming whatever the challenge you currently face. For sure, one source of self-efficacy is experiencing success, and when things are not going well you can draw on past successes in order to sustain your confidence. Yet, as one fighter-pilot told me

 “being able to fall back on previous good days out is not a valid way of making you better in the future.”

Sports psychologists adopt many techniques to sustain self-belief when one can’t draw upon success. Confidence is integral to managing money; holding contrary opinions or losing positions or can create self-doubt, impacting subsequent decisions. Elite performers actively attempt to manipulate their self-belief. Often this involves adopting simple, seemingly trivial habits. Small things have big effects.



It should be no surprise that from chess grand masters to international violinists, elite performance is strongly associated with the amount of quality practice. The obvious repost from a portfolio manager is “how can I possibly practice, I perform every day.” This is lazy thinking. You simply cannot learn to excel at anything without practice. This applies as much to managing money as it does to driving, cooking, or learning a language. And by practice I do not mean experience. Experience, is not an effective way to develop expertise. Tiger Woods did not get to where he is just by playing rounds of golf. He employs a very specific form of deliberate practice (this form of practice has been described in many pop-psychology books and is often mis-represented, with its implications ignored, but that’s another story). Just as for professional investors, surgeons in training are performing everyday. Yet they also practice, either with simulations or in real time surgery, supervised by an attending. Within the context of the investment world, understanding the key skills necessary to excel and practicing them, even if every day is a ‘performance’, is the only way to develop expertise.



  “I don’t want people who want to win. I want people who want to prepare to win”

Bob Dwyer: “Prepare to win”

These are the words of Bob Dwyer, coach of Australia’s 1991 rugby world cup winning team. Elite performers prepare assiduously. Fast-jet pilots often ‘arm-chair fly’ where they sit down and image a forthcoming sortie. Preparation begins well before a flight and involves reminding themselves of all the weaponry on the jet and it’s functionality, thinking through how an enemy may respond to contact, how they will react in turn, and readying themselves mentally for the flight. As Michael Johnson said “commitment and preparation are all that mark the differences among an arena full of perfect specimens.” Preparation is a tremendous source of self-belief.

Realistic critique of performance

“You spend your whole day planning as hard as you can, you briefed as hard as you can, you’ve flown as hard as you can, you come down and there’s still two hours of what you did wrong”

If you incorporate one thing from this article into your work, please make it this one. You simply cannot develop excellence in any field unless you can critique your performance accurately. This means losing the ego. In no environment have I seen this more effectively applied than in military fast-jet flying. You won’t last long in that job if you can’t take criticism. These guys have a relentless quest to be better at what they do, and they can only do that if they identify where they are underperforming. Consequently, de-briefings are a large part of their lives.

It is interesting to contrast this with an interview Alex Ferguson gave in the Harvard Business Review last year in which he said you can’t criticize players too much, for it doesn’t get the best out of them. This illustrates the idiosyncratic nature of high-performance; it is context specific. There is no ‘one size fits all.’

Within medicine, there is a particular emphasis on critiquing performance when teaching mental skills to surgeons. Central to this is the ability to be reflective.

One of the most important aspects of learning to be a master surgeon is to learn how to reflect upon what you have done, analyse your results and learn from everything that goes on.’

Managing one’s performance involves analysis, reflection, and constant feedback. This is supported by a mindset of needing to constantly improve and get better. A requirement during coronary artery bypass surgery is to stitch a graft to an open coronary artery. Some stitches are referred to as ‘widow makers’ since the patient may die if done incorrectly. Curt Tribble, a world leader in thoracic and cardiovascular surgery described in the Journal of Excellence how he learned to place the stitch, analyse it, listen to comments from his professor, suppress any emotional reaction and refocus for the next stitch. He would dictate his thoughts at the end of the operation and discuss the case with a colleague. This ability to monitor, analyse and review are the core elements of critiquing performance.

The enemy of performance excellence is defensiveness. We all know colleagues who blame everyone but themselves. They have no questions about their abilities. Consequently, they learn nothing and have no concept of their limitations. They lack self-awareness.


Focus and distraction control

Focusing is probably the single most important mental skill to performance excellence. Focus is about concentrating fully on what you are doing, seeing, feeling, observing or experiencing whilst you perform. The degree to which you can focus affects the quality of your learning, preparation and performance. To perform effectively at anything you must refine your ability to focus.

Most of us are thinking either of the past or the future. We are very rarely ‘present’, and yet it is essential to performance excellence. Focus not only refers to being completely attentive to the current task in hand without allowing your mind to wander, but also refers to not allowing ones attention to be ‘captured.’ Actively training to improve attentional control is effortful, and as with any psychological skill it takes time to develop. Where your focus goes, everything else follows. A lack of focus can lead to anxiety and rumination which inhibit performance or more usefully, to activation, learning and personal growth.


Coping with stress