Late to the party

This year has been particularly uneven in terms of returns and, in some regions, especially volatile. In Korea, for example, after reaching a 125% return in June, the market corrected more than 34%, only to rebound 17% in the past week.

Amid this frenzy, the temptation is to jump quickly onto whatever trend is in vogue—regional, sector-based, or thematic. While that may seem sensible at first, the reality is far more complex.

Take global memory-chip companies. This has undoubtedly been one of the sectors that benefited most from the AI boom and technological progress in general.

The financial industry nimbly launched a fund in April offering "pure," simple, and efficient exposure to this subindustry. The fund was a hit, raising more than US$26 billion in three and a half months. Returns followed: over that period the strategy delivered a 102.6% return. So all good, right?

For investors in aggregate, no. The average investor's IRR in that fund has been just 2.1%. How is that possible? The fund launched, soared, and only then did the big inflows arrive—capturing just a fraction of the return.

Not only is there no foolproof method for identifying the successful trends of the future, but to earn positive returns on these strategies it's crucial to remember that you have to invest at the right moment—which also can't be predicted. Unfortunately, when you follow the crowd, you often arrive late to the party.

Column written by José Ignacio Villarroel for Diario La Segunda.