[MUSIC] Okay, so on this subject of staying invested and being a bottom-up or be able to leave the boats, as we just saw, and basically use asset allocation, and a top-down approach. Well, what matters more? There are many academic studies which address this issue of what matters more. Is is asset allocation? Is it stock picking? Indeed, one of the key study conducted in this field was made by these people which you see here, and that nicknamed them BHB. And it's called, Determinants of portfolio performance. What they did is they compared the performance of long-term asset allocation, a policy mix relative to what we say active performance. Where you take decisions on both timing and entering or exiting the market, and security selection. And the results is that they have said to have found that the policy mix explain 93.6% of the average return. But indeed, I read this paper again. And it's not very clear whether they actually mean that asset allocation explains 93.6% of the long-term return. But indeed, a lot of people have interpreted the results this way. And today, it remains a motto, a mantra, that a lot of people have and say, you should only focus on asset allocation because that drives more than 90% of your long-term performance. This is a very key aspect of investment management. If you know that in the long run 90% of your returns are derived from the asset allocation decision, then you obviously think why should I bother making a careful selection, making a security selection, if that only accounts for less than 10%. But on this key issue of what drives returns in the long run, and the academic study I just mentioned, there's actually been a huge misinterpretation. BHB, as we've called them here, did not say 93.6% of the average return, but of the variance of the returns. So this is very different. We don't say returns, we look at variances, i.e., dispersion, i.e., risk, so it's more an explanation of the risk than on the performance. And this person here, Roger Ibbotson, he published in the Journal of Financial Analysts, The Importance of asset allocation" six years ago. And he points to this confusion, that people generally make about BHB, and you see this on and on. If you type in Google, importance of asset allocation versus stock picking, you will inevitably see many many firms who are referred to this study and say as the location dominates stock picking. And what Ibbotson shows is that the answer is not so clear cut. Asset allocation is clearly very important, but he says it's nowhere near the 90% that people think BHB acclaimed or as we say wrongly attributed to BHB. So in the end it's certainly not 90% and Ibbotson says is probably more closer to 50% which is fair, 50% asset allocation 50% security selection. Again, when is one ging to do better than the other? Please refer to the first video on market conditions and diversity of returns across sectors and across companies. So in conclusion, the top-down method is a fundamental macroeconomic and policy driven approach, which starts from the global picture, moves into the country/sector, and then the security selection. In the bottom-up you start from the security selection and you build your portfolio from the bottom up. Here something which I referred just in passing is that the first filter can either be a fundamental filter, in this case it was one. We conducted this primary research and we identify the investable companies and then we do some valuation analysis and technical analysis. But sometimes you also find companies who will do the first step which will be just quantitive. Basically you take say 2,000 companies and you filter them, and you identify the ones which have the lowest PE, the highest return on equity and so forth. And you have multiple criteria and you reduce your universe of stocks using a first filter which will be quantitative based on valuation. And once you have this reduced set of your universe, the invisible one then [COUGH] you make the second step of conducting research primary or secondary. So it's important because you don't get the same result whether you start by the research aspect and you add the technical aspect on to it. Or if you do the opposite, you don't end up with the same portfolio. Bottom-up, top-down, which is better? We saw that the market conditions that explain one versus the other, in terms of performance, and that they can be successfully combined. [MUSIC]