In this series of profiles, we ask leading investment fund managers to tell us everything from their investment strategy, to their views on current economic risks, their favourite forever stocks, the best piece of advice they’ve ever been given and what they’d never invest in.
This time our interviewee is Ian Mortimer, manager of the Morningstar Silver-rated Guinness Global Equity Income fund.
1. Which sector provides the biggest investment opportunity in 2021?
Consumer staples sector looks interesting from a valuation point of view. These stocks have been out of favour and while their valuations may still look somewhat elevated relative to the market, as a group they’ve always traded at a premium - but historically the premium would be 10-20% higher than it is now. So, on a relative basis, they’re looking good value. But you have to consider that not all companies in that sector have great pricing power. So, although we think the sector is interesting, you have to be quite selective and look for companies that have slightly more pricing power within it.
2. What's the biggest economic risk right now?
Inflation and inflation expectations. We have not been in a period of any inflationary pressure at all for a significant period of time. But inflation is not necessarily a bad thing, you have to be cognizant of the level of inflation and the speed at which inflation rises. If you get a big spike – which isn't expected – equity markets would react quite negatively. However, if you had inflation rising relatively slowly and steadily over time, then you might actually consider that as quite positive for equity markets, as that’s generally saying the economic environment is doing quite well
3. What's your investment strategy?.
I run the Guinness Global Equity Income Fund with my colleague Matthew Page, and we launched it back in 2010. We believe the best way to achieve outperformance from investing in dividend paying companies is to seek those companies that can grow their dividend successfully over time. We think the best way to identify those types of businesses is by looking at high return on capital and strong balance sheets. And ultimately, we seek a moderate dividend yield.
4. Which famous investor or business professional do you look up to, and why?
I like James Montier at GMO. He writes really interesting analyses of markets, and is focused on behavioural finance, and how that can influence decision making.
5. What's your favourite forever stock(s)
We tend not to have a favourite stock - our portfolio has just 35 stocks in it but they are all equally weighted.
6. What would you never invest in?
We're not going to be looking at companies that essentially don't have any earnings yet – the more speculative end of early-stage businesses. When you’re trying to work out what they're worth, it's really all on expectations. And although we recognise that approach can be a marvellous way to get really significant returns – if you get it right – we believe it’s incredibly difficult to get it right on a regular basis.
7. Growth or value?
I would say both. Ultimately, we run the Global Equity Income Fund, which is more value orientated. But we also run our Global Innovators Fund, which is growth.
8. House or pension?
Pension. I'm about to invest my pension for this year, and I'll be splitting that 50% in Global Equity Income and 50% in Global Innovators as part of that.
9. What are your thoughts on crypto?
It's actually fascinating to look at, but we're not quite sure it's investable. From our perspective, we have looked at some companies exposed to crypto in our Global Innovators product, but we can't find anything that we'd really like. Currently, I still don't see it as a store of value. When we're thinking about things like cryptocurrencies relative to say, gold, you would be looking at it as a store of value. I think it could potentially be that in the longer-term - but at the moment it seems so volatile! I think what's going to be fascinating is how it plays out longer term, because clearly it's a very interesting technology for all sorts of different reasons. But how will governments feel about essentially giving up their monopoly, if you like, on fiat currencies? We'll continue to monitor as we go forward.
10. What can be done to increase diversity in the fund management industry?
Encourage younger people from diverse backgrounds into the industry and show that fund management is actually a really interesting career path to take. It is a pretty challenging career. It changes day by day, and it could be an enjoyable place to work for many different types of people.
11. Best bit of advice you’ve ever been given?
You can only sell your potential once. Somebody told me that when I started doing interviews. So don't necessarily take the first thing that comes across your desk and hold out for that thing you'd really like to do.
12. What's been your best investment?
We bought Microsoft when we launched the Guinness Global Equity Income fund back in 2010, and we still own the stock. At the time it was seen as "ex-growth" and rather out of favour, but providing a healthy dividend return to investors. Clearly the company’s prospects, and market sentiment, have changed dramatically over that time, which has been reflected in a significant rise in the share price. And the dividend is now 3.5 times what we received at purchase
13. What would you do if you weren’t a fund a manager?
I have a PhD in physics, and I might have been a scientist. But I'd like to say architect!
