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 Charles Stanley's Chris Ainscough. He is director of asset management at the business, and acts as co-manager on its Morningstar 3-star rated Monthly High Income and five globe-rated Charles Stanley equity funds.
Which Sector Shows the Biggest Promise in 2022?
I think we may be at the inflection point now where the spread between the "winners" and "losers" of 2022 begins to narrow. Clearly the energy sector has been the biggest winner of 2022, which we definitely didn’t call at the start of the year, at the expense of the more growth and tech tilted sectors. We are conscious that the energy crisis isn’t going to be resolved quickly, but that being late to the oil and gas party is a real risk. For preference we would probably try and pick up both of these themes (energy and a partly de-rated growth complex) through something like an energy transition vehicle, capturing the short-term upside from power prices and the long-term structural growth of cleaner energy.
What's the Biggest Economic Risk Today?
I’d be lying if I looked for a more interesting or niche risk than inflation and/or central bank attempts at curbing it. If we were to drill into this risk however it would be the persistence rather than the shock and awe of double-digit prints that really concerns us. If we see inflation expectations embed, and wages ratchet up in response to it, then we could be in for a pretty hard landing engineered by central banks to re-anchor these. This isn’t our base case, but it is a substantial tail risk now.
Describe Your Investment Strategy
Given the above, you will appreciate the current challenging environment for our investment strategy and approach, which is targeted towards delivering inflation-plus returns from globally unconstrained multi-asset portfolios. I would highlight a couple of things within this. Time horizons matter and we wouldn’t claim to be looking to achieve this objective over any single 12-month period; it is an over the cycle target. What we really want to focus on is the risk-adjusted returns that we deliver over the cycle. In order to give ourselves the best chance of delivering these in excess of inflation we maintain an unconstrained opportunity set. Taking my own portfolios directly, I layer onto this an agnostic approach to implementation – allowing me to pick from both the active and passive universes to hopefully to find the best vehicle for the theme.
Which Famous Investor Do You Admire?
We really emphasise the benefit of centralised and team-based investment processes – both within our own product sets and in many of those that we utilise from third party managers. Picking a "star manager" comes with inherent risks, so we much prefer teams and robust repeatable processes rather than the big name fund managers in isolation. I admire investment teams who leverage breadth of thought and contribution while not straying towards groupthink or a low-conviction middle ground – as these are clearly the risks of a team over a solo approach.
Name Your Favourite "Forever Stock"
With my global multi-asset hat on it is hard to isolate a forever stock beyond a broad passive tracker to give you market exposure at a low cost. We believe in active management and dynamic asset allocation, which allows us to flex our positioning and adapt to the world around us. This flexibility is what gives us confidence to take higher conviction positions against what would be a passively implemented strategic asset allocation. If I had to buy something and hold it for 30 years with no exit option then it would just be market beta. Even the growth technologies of today can become the legacy businesses of the future in that horizon.
What Would You Never Invest In?
Gold. This can be a controversial one, but I don’t see the allure. Keep it for jewellery, not your portfolio.
Growth or Value?
Neither! We’ve actually had this debate among the team recently and came to the conclusion that the binary split of growth/value doesn’t really cut it in terms of defining market segments anymore. Some of the more mature growth stocks could now look like value plays and the bifurcation of segments within value is at extremes. I think with the intangible nature of many businesses and their assets the world has evolved a long way from the traditional approaches of defining these two segments. At this juncture, I’d apply a more quality lense to both and look to try and strip that out.
House or Pension?
House – but you definitely need both. House prices are sadly at such high levels that homeownership is a distant dream for many in "generation rent”, but if you are able to get on the ladder then it is often lower cost to service a house than to rent and you can benefit from owning a real asset over the long term. That isn’t to say put all your funds into buying a house and forsake your pension, but houses can also be used in a similar manner to pensions for funding retirement with schemes like equity release or simply downsizing later in life so they can serve two purposes.
Crypto: Brilliant or Bad?
Most of the crypto coins out there are junk today, but a lot of the technology behind them is gold. I find the blockchain and the power of distribution networks, apps and mediums of exchange fascinating. Very few are accessible or viable investments, often by their very design. In short, would I recommend people go out and indiscriminately buy crypto coins or miners? No. Should people dig into the weeds a bit and understand the technology and how it may be applied and benefit us all in the future? Definitely.
How Can We Increase Diversity in Fund Management?
There is no one silver bullet; rather, a swathe of smaller changes that will hopefully have started to improve the situation – though as a career segment we undeniably remain a very long way away from being representative of the broader population. Our current charity of the year is Open Palm. It was co-founded by my Charles Stanley colleague Ralph McBaiden and hopes to address some of these issues across different racial and social backgrounds.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
We tend to find engagement works best when coordinated centrally and in conjunction with other market participants. The larger the group of investors that you can band together, the better the chance of achieving the outcome!
What's The Best Bit of Advice You’ve Ever Been Given?
Don't get caught up in the noise if you're a long-term investor.
What Would You be if You Weren’t a Fund Manager?
I'd be a gardener. I've just spent six months of evenings and weekends landscaping my small back garden. It's very therapeutic.
