PRESENT
trustnetdirect.com
THE PERSISTENT STRONG
PERFORMANCE OF
GOVERNMENT BONDS HAS
LEFT MANY MULTI-ASSET
MANAGERS KICKING
THEMSELVES
2015. For Andrew Hall, co-manager
on the Invesco Perpetual Global
Opportunities fund, that was Japan.
In general, he and co-manager
Stephen Anness avoid Japan,
believing that companies tend to be
run for the “greater good” rather
than for shareholders. However,
Japan stocks performed strongly
over the year.
Hall was on the other side of
Volkswagen, buying in just after the
scandal broke. He points out that
the group has an outstanding stable
of brands, including Audi, Porsche,
Lamborghini and Bentley, plus a
new management team.
For Jim Paulsen, chief investment
strategist, Wells Fargo Asset
Management, the reality he was
forced to confront in 2015 was the
lack of progress on rate rises. He
says: “I thought commodity prices
would have lifted and rates would
have popped. I thought we’d have
strong wage growth. That said, I did
think we’d have a correction in the
stock market, so we called that one
about right.”
The point of Scrooge’s visit from
the Ghost of Christmas Present was
that it teaches him to learn from his
mistakes and to be better in future.
Those fund managers that can
admit their errors in 2015 may just
learn to avoid them in 2016.
avoiding anything to do with the
commodities markets. Adrian Hull,
fixed income product specialist at
Kames, says that he largely managed
to avoid both areas, but other parts
of corporate bond exposure proved
disappointing.
Perhaps the most unexpected
lesson for them through the year
was dealing with the volatility
of investor sentiment. Hull says:
“Bunds went to 5bps, and were
quickly back up to 60 to 70bps. That,
for us, was the standout feature of
2015. Investor sentiment in Europe
went from the sublime to the
ridiculous in a short period of time.”
He points out that expectations
on China were also wildly variable:
“It was frustrating trying to get this
market sentiment right.”
There were also managers
whose process naturally led them
away from certain areas that
performed particularly well in
PERFORMANCE OF STOCK YEAR TO DATE
10%
0%
-10%
-20%
Glencore (-67.85%)
-30%
-40%
-50%
-60%
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
-70%
Jan 15
Kevin Murphy sold too early. He
says: “We sold Dixons and the share
price continued to rise, so we could
feel a little silly on that one. The
same might be true of Rentokil and
Computer Centre.”
He also sold some smaller and
mid-cap companies to buy the
FTSE 100, which has not yet proved
particularly fruitful.
That said, this is part and parcel
of being a value investor: Kirrage
needs to buy and sell with clear
reasons: “For example, we bought
the housebuilders when they were
very cheap and appeared to offer
a free option on a stabilisation of
the housing market. They doubled
and we sold, but they’ve since
gone up a long way on the back
of a huge increase in house prices.
The trouble is, to hold on to them,
we’d have had to bet on that house
price growth happening ahead of
time and that was by no means
assured.”
For Kirrage, the most shocking
thing over the past year has been the
huge share price moves in some of
the larger capitalisation companies.
He says: “We have seen £30bn to
£40bn companies halve and then
halve again [see graph]. I still find
that extraordinary. It shows that
safety is an illusion.”
The bond markets have perhaps
given investors even more cause for
regret in recent years: the persistent
strong performance of government
bonds has left many multi-asset
managers kicking themselves. In
2015, there was significant volatility
in bond yields, but they look likely
to end up broadly the same at the
end of the year as they did at the
start. As such, there is perhaps less
to regret for those who invested – or
didn’t invest – in government bonds
this year.
For corporate bond managers,
there were certain areas that
were worth avoiding. The equity
and debt of Volkswagen – and by
extension a number of the other
carmakers – were hard-hit by the
emissions scandal. It was also worth
Source: FE Analytics
5