INVESTING
Pandemic effects and opportunities
Lessons can be learnt from all crises that affect investment markets. Paul Taylor looks at the changes to society black swan events have caused and the investment opportunities that may arise from the coronavirus pandemic.
PAUL TAYLOR is the portfolio manager of the Fidelity Australian Equities Fund.
22 selfmanagedsuper
As an investor, this is my ninth investment crisis in my 23 years at Fidelity. During my career I have seen markets impacted by the Asian financial crisis, Russian bond default, collapse of Long-Term Capital Management , September 11, tech bust, global financial crisis, sovereign debt crisis, SARS and now COVID-19. Although it if fair to say this crisis is different from each of the previous ones, there are definitely lessons to be learnt from all of them. One of these lessons is how we approach a crisis such as the one we are facing today. Donald Rumsfeld, United States secretary of defence from 2001 to 2006, during the war on terror, separated risks into known unknowns and unknown unknowns. Rumsfeld was ridiculed at the time, but
we can now see the point he was making. He was suggesting there are regular risks we can plan and manage for, and there are some risks that are off the charts and very diďŹƒcult to prepare for before the event. Some people also call this second group black swan events, after the Nassim Taleb book of the same name. The COVID-19 pandemic fits in this second group. The diďŹƒcult issue in dealing with black swan events is that you are dealing with little and imperfect data. At the start we have very little data and need to exercise a huge amount of judgment. As time goes by, we get more and more data and analysis and judgment is required less. Andrew Likierman from London Business School
