In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their forever stocks, and tell us what they'd never buy.
This time our interviewee is Audrey Ryan, manager of the Morningstar Bronze-rated Aegon Ethical Equity fund.
Which Sector Provides The Biggest Opportunities in 2022?
We are very much bottom-up stock pickers, looking for individual companies that can outperform, rather than taking specific sector-wide views. That said, key things to look out for in 2022 will be companies with the pricing power to pass on the effects of inflation and those that continue to have the operational flexibility to deal with Covid-19-driven disruption. Experienced management teams will be important for both.
What's The Biggest Economic Risk Today?
Inflation is at the heart of many factors that have the potential to move markets. We have already seen it prompt the Bank of England to raise rates for the first time in a number of years and if it begins to seriously impact company margins across the board, which it hasn’t done up to now, then it could become a significant risk for equity markets.
Describe Your Investment Strategy
The Aegon Ethical Equity Fund offers a focused portfolio of predominantly UK stocks which excludes companies that cause significant harm to the environment or society. We have a clear and transparent set of exclusions, overseen by our Responsible Investment team, to remove such stocks from our starting universe. After that, we use bottom-up fundamental analysis, including consideration of ESG factors, to build a focused portfolio which tends to have a tilt towards growth and be overweight small- and mid-cap stocks versus its benchmark.
Which Famous Investor Do You Admire?
I really admire Sheryl Sandberg [chief operating officer at Meta]. She’s an incredibly driven and resilient person who has achieved so much in her life. In particular, her work in promoting equality and opportunities for women in leadership roles has been valuable.
Name Your Favourite "Forever Stock"
RELX is an incredibly well-run business and is a stock I’ve owned for many years, over which time it has delivered consistent, compounding returns for investors. The company provides data and analytical solutions and has leading market positions across the health care, scientific, business risk and legal industries. It also has an excellent ESG profile.
What Would You Never Invest In?
Anything that causes significant harm to the environment or society. The fund has a clear set of ethical exclusions that remove areas such as armaments, tobacco, alcohol, gambling and animal mistreatment from the investible universe.
Growth or Value?
The fund tends to have a growth tilt but I think it’s important not to get too wedded to one or the other. We do also invest in more value type areas of the market, which provides diversification and means the balance of the portfolio can be adjusted depending on the stage of the economic cycle. There are different types of growth and value stocks too, for example cyclical growth and structural growth, so we shouldn’t just treat all growth or value stocks as homogenous.
House or Pension?
Ideally both but pensions are particularly important, especially for the younger generation who will have to save more for their retirement. The key to both is encouraging good savings habits as early in life as possible, even if it’s only modest amounts to start with.
What's the Best Way to Analyse a Company from an ESG Perspective?
There’s no ‘best’ way to do this and different approaches can be valid. At Aegon, we have a common ESG analysis framework for equities which seeks to identify what the most material ESG factors are for a company, how significant they are to the investment thesis and whether the company’s performance on these factors is improving or deteriorating.
What Can be Done to Increase Diversity in Fund Management?
It’s all about the base of the pyramid for me. The lack of diversity fund management has probably been as much down to certain groups not even considering the industry for a career in the first place, as it has been to the challenges they face once they are in it. So first and foremost, we need to make the industry a place where people from a wide range of backgrounds actually want to work. Then we need supportive programmes to ensure a stream of talent from different backgrounds has access to the industry and stays in it for the long term.
At Aegon AM we have delivered talks to senior school girls about the world of investment and potential career opportunities as part of the Future Asset programme in Scotland. We also offer one year investment placements, which focus on gender, ethnicity and social mobility. We also have a board-level D&I scorecard, which is linked to performance assessments and remuneration.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Engagement is a key aspect of our approach and we seek to be a constructive partner with our investee companies in order to encourage improvement on meaningful issues that can help them become better businesses. What makes me really proud is that we have actually had a number of companies proactively come to us to seek our advice on certain issues before going to market and then to implement our feedback in the resolutions that they have ultimately proposed.
What's The Best Bit of Advice You’ve Ever Been Given?
There are two mantras that I think are really important to live your life by: "treat others as you would like to be treated" and "learn from your mistakes and look to the future". Sticking to them will help, whatever walk of life you’re in.
What Would You Be if You Weren’t a Fund Manager?
Probably still be in financial services – I qualified as a Chartered Accountant in a previous life, so that would be my alternative!
