A 14-minute watch.
Our Octo Selectors Series continues with Square Mile’s director of research and consulting, Victoria Hasler, who talks to Gary Shepherd about capacity, style drift, and performance pressures.
With selectors keeping close tabs on fund size, Victoria tells us how she avoids the “greedy” asset managers who put profits before performance.
“We want to make sure that the level of alpha that they are producing isn’t compromised by the size of the fund,” she explains.
Victoria also talks about having to “drill a bit deeper” to address client concerns, with cautious investing “not as clear as it once was”.
“The risks out there are quite diverse. If a client tells you they are cautious, my first question to them would be ‘what are you worried about?’, because that then determines the kinds of assets you want to go into,” she explains.
“If you are very worried a recession is around the corner, then you probably want to have a fair chunk of your portfolio in cash and high-quality government bonds because they do provide diversification in that kind of scenario.”
“If you are really worried that we are going to have a change of government in the UK and public spending is going to increase massively, then you probably won’t want to buy gilts at the moment because the issuance could go up quite significantly and that could mean yields go up as well and the bonds sell off.”
The conversation also covers real concerns about style drift, which can go two ways: “If a fund is underperforming at a time when you would expect it to outperform, then that’s a real worry.
“Equally, if a fund is outperforming when it is expected to underperform, then that can ring alarm bells as well. With markets having been going up for the past 10 years with only a few blips in between, then I think there is more pressure on some fund managers to get that absolute performance”.
Hear more from Victoria in our longer-form written interview here.
23 November 2019