The last couple of weeks have been unusual for me, getting out of the office and going to three conferences, a real step back to physical events. As much as hybrid working has brought about clear benefits, extended investment conferences only really work in person, in my experience, so it’s good to see them back.
All three conferences were pretty different, starting with the Next Generation Forum, or NGF, which showcased new managers and strategies, some of which had yet to launch. It was then up to Edinburgh for Baillie Gifford’s investment trust conference, which comes at a tricky time to be a growth investor. Lastly, Portfolio Adviser’s Summer Congress, which married the old and the new, with some very well-established funds, some less well known, and again the odd new fund.
Seeing so many managers gives a great opportunity to spot trends and see where current thinking is leading. For the first time in a very long time, the value managers are the ones sitting more comfortably, whilst those investing in higher growth companies that have been heavily de-rated are somewhat licking their wounds. On that front, there is a very consistent narrative by most growth managers, highlighting businesses growing as they expect, but of course being impacted by the broad de-rating. That isn’t true for all of course, and the likes of Peloton, the indoor bike manufacturer, seems as good an example as any of the move out of lockdown and how our behaviours again change. One interesting discussion we had centred around whether ultimately the decision of how much time people spend working from home will determine the future success of a cohort of COVID winners. Clearly quite an active debate at the moment.
One of the most thought provoking presentations was from a Global Equity Income manager, who made a strong case for income going forward, highlighting how unusual the last decade has been in terms of the vast majority of returns being derived from capital rather than income, something that is far from the long-term norm. Certainly, anyone investing with an income mindset has struggled until recently. Perhaps we are heading back to a position where this type of strategy will lead the market for an extended period.
China was another topic for debate. On the one hand, there seems to be a clear consensus that the potential for the likes of Alibaba and Tencent have been significantly curtailed by the actions of the Chinese government. But at the same time they look cheap, even after taking that into account. Of course, not everyone is willing to take that elevated risk. On the flip side I heard three managers comment more broadly that now was an interesting time to invest given the COVID lockdowns, and the potential re-opening trade that we have seen in action elsewhere - although certainly not all were taking that view, and it may take some time to play out.
It was a controversial week in the world of ESG, given the comments made by the Head of Responsible Investing at HSBC. There was nothing as headline-grabbing in my meetings, but there was a general feeling that fund groups should dial down the amount of focus on ESG process in meetings, where perhaps it has started to take up too much airtime. Of course, marketing teams focus where they think the interest is, and so often we see the same topics and themes become omnipresent in all presentations. Going forward I would expect all funds to incorporate ESG factors and stewardship (voting & engagement activity) within their process, and that then be seen as the norm, and hopefully managers will be taking that step further to focus more on real positive examples.
There was no lack of interest in funds more directly focused on ESG solutions though, and interesting to see new products, a couple of which had a distinct value feel to them.
That is certainly helpful in the current environment and to aid portfolio balance presuming they prove to be good investments, of course. Lastly, as one slightly cynical portfolio manager noted, it does feel like every fund is launching as either an Article 8 or 9 proposition, the labelling created within the EU Sustainable Finance Disclosure Regulation. In other words, either deemed ‘light green’ in the case of Article 8 or ‘dark green’ for Article 9. In fact, in Q1, Morningstar reported almost 50% of fund launches were in either category, and one wonders whether many Article 6 funds (i.e. those with no sustainability criteria) will remain in a few years’ time. Hopefully a positive so long as we are avoiding the greenwashing.
Finally, when it came to where is currently the most attractive area of the market, there were plenty of managers with charts highlighting the extremes of their part of the market. That included small caps, biotech, emerging markets, UK, income, and more.
Whilst hearing from managers face-to-face was excellent, it was a good reminder of the broader value of these events, one being the chance to sit among peers, which can always provide a different view. Broader discussions outside of formal meetings can also prove helpful and provide additional insights. With so many managers presenting, it was a good chance to take the investment temperature on a number of issues. Two of the events also introduced several strategies that were yet to even launch. For some investors, a three-year track record or a minimum fund size is critical. However, being open minded to investments at the start of their life can occasionally uncover new ideas that are both additive in terms of performance and potentially come at a lower fee for early investors, both of which offer a better outcome for clients.
So, for me it’s a case of back to the desk to ponder on what I heard and progress those most interesting strategies.
This is a marketing communication and is not independent investment research. Financial Instruments referred to are not subject to a prohibition on dealing ahead of the dissemination of this marketing communication. Any reference to any securities or instruments is not a personal recommendation and it should not be regarded as a solicitation or an offer to buy or sell any securities or instruments mentioned in it. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. This document is not intended to constitute financial advice.
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