In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Baylee Wakefield, a fund manager at the Aviva Investors Multi Asset Fund range, which includes the Morningstar 3-globe rated Aviva Investors Distribution Fund.
Which Sector Shows the Biggest Promise in 2022?
Year to date, the energy sector has outperformed the most. The supply and demand mismatch of oil and gas has been exacerbated over the past few years due to the pandemic and geopolitical factors. Although increased recession fears could weigh on the sector towards the end of the year, this still seems one of the cyclical trades with the best structural fundamental support.
What's the Biggest Economic Risk Today?
Inflation and rising interest rates. Markets have swiftly moved on from the concept of “transitory” inflation and central banks did not fully appreciate that inflation would become much more broad-based post Covid-19. At times, inflation and interest rate concerns have led to sharp repricing in both equities and bonds but the battle is not over yet and will remain crucial for investors.
Describe Your Investment Strategy
The investment strategy must be complimentary to the objectives and risk tolerance of the fund which is why we implement some of our views strategically via longer term trades but some also tactically, exploiting shorter term factors. At times momentum, value and growth all have a role to play in the portfolio, but a solid process of identifying the current market environment to exploit those shorter-term factors is key.
Which Famous Investor Do You Admire?
Perhaps not a surprising answer, but Warren Buffett has taught us that following a disciplined process consistently over time works extremely well. Of course, that means we must also recognise the importance of the investment principles set by Buffett’s mentor, Benjamin Graham, and the framework for stock analysis that he taught. I also admire Geraldine Weiss for leading in a male dominated field despite having to conceal her identity as a woman.
Name Your Favourite "Forever Stock"
As macro investors, one of the most important decisions that we make is the overall risk level that we want to take. The asset class that gives us the most flexibility to do that, particularly in a way to exploit short term opportunities, is equities. Principally, we can make that call through being overweight or underweight US equities as it is the largest, most transparent, and most accessible market in the world.
What Would You Never Invest In?
I would never invest directly in tobacco stocks. Primarily, tobacco has a huge negative effect on society and health impacts are profound: there is no safe level of exposure. Secondly, there are a number of long-term risks associated with investing in the tobacco industry including regulatory risk, litigation risk, reputation risk and supply chain risk.
Growth or Value?
There is certainly a time and place for both, but I’d have to favour value currently. Post the global financial crisis, value has had the longest period of underperformance since World War II. This came to an end at the announcement of the COVID-19 vaccine. The macroeconomic environment is currently in value’s favour, as value performs best in high inflation regimes.
House or Pension?
Pension always wins this debate! Never underestimate the power of compound interest and the benefit of having time on your side, particularly if you are a young investor. Although a house has historically been a good investment for retirement, there is a large amount of concentration risk involved. Therefore, a dynamic, diversified multi-asset portfolio can be used to meet the same retirement objective with a more attractive risk/return profile (plus you can always allocate a portion to alternatives such as real estate within your portfolio!).
Crypto: Brilliant or Bad?
Currently, as an investment, I’d have to put this in the “bad” category. It’s difficult to have a robust investment process for an asset class that is primarily based on speculation, and therefore extremely volatile. Technical analysis can help here, but the potential for large losses based on little new information is striking. However, with more countries supporting crypto payments, it could soon be the way of the future.
How Can We Increase Diversity in Fund Management?
A topic I’m particularly passionate about. I think diversity needs to be tackled both from “top down” and “bottom up” initiatives. The number of apprenticeship roles and work experience placements should be increased, particularly in the front office. Businesses should work to promote fair female and minority representation when interviewing for new roles and should support networks and events to encourage diversity in the industry.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Our ESG team have maintained a multi-year dialogue with Chubu Electric on a range of governance and climate-related issues. When the team met with the company’s CFO last year, there was discussion around the new net-zero 2050 ambition, updated 50% emission reduction target by 2030, and positive changes within governance practices.
Most notably, these included the recent refreshment of the board with the addition of two new members and increase of independent directors in tandem with a suite of diversity initiatives, including a 2025 target to triple the number of female managers from FY2014, both long-standing engagement requests.
What's The Best Bit of Advice You’ve Ever Been Given?
This is a challenging question as I’ve received a lot of good advice throughout my studies and in my career so far. My favourite piece has to be that “luck comes from hard work and when you quit, you fail”. Every day is a school day, and we all have plenty to learn!
What Would You be if You Weren’t a Fund Manager?
Before I joined the industry, I obtained a Batchelor’s degree in Biomedical Science and a Master’s in Genomic Medicine. If I stayed in the medical field, I probably would have become a Clinical Geneticist or a Genomic Councillor.
