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 Chris Clothier, CFO at CG Asset Management and Co-Manager of Morningstar 5-star rated Capital Gearing Trust (CGT), which has a Morningstar Analyst Rating of Silver.
Which Sector Shows the Biggest Promise in 2022?
Treasury Inflation Protected Securities (TIPS), US government inflation linked bonds. We think these provide a great each way bet on what we judge to be the two most likely macroeconomic outcomes. Either the Federal Reserve struggles to bring inflation under control or the Fed causes a nasty recession. We think that the middle path of a “soft landing” seems pretty remote.
What's the Biggest Economic Risk Today?
It depends what is meant by biggest. In absolute terms, the biggest economic risk is probably a Chinese invasion of Taiwan, but I can’t tell you how likely that is. The risk we judge to be most under-priced by equity markets, even though it is firmly in the sights of bond markets, is a sharp recession in the US.
Describe Your Investment Strategy
Avoid losing money - if you get that part right, most of the rest follows.
Which Famous Investor Do You Admire?
Too many to name here, I suppose that I particularly admire those that go out of their way to help educate the general public. In that context Howard Marks, Terry Smith and Warren Buffett all get honourable mentions but my absolute favourite has to be Charlie Munger for his wit and clarity of thought.
Name Your Favourite "Forever Stock"
Capital Gearing Trust is my forever stock and that of my partners. But I accept that is a boring answer for your readers. My two forever stocks don’t exist in the public markets, but if they did I would buy them in a heartbeat: The Lego Group and Bloomberg LP. I quite understand why they remain private, if I owned them I would never sell them to the public markets either!
What Would You Never Invest In?
Crypto. It is nothing short of an ESG disaster: facilitating illegal payments for child pornography, consumes vast amounts of resources and is rife with all sorts of Ponzi schemes and scams.
Growth or Value?
CGAM is an unashamed value house but that doesn’t mean that we can’t own growth stocks, we just need to find a cheap way to go about it! We like investing in investment trusts on discounts where we think that the discount is unwarranted and will close. That leads us to all sorts of sectors. This year we built a large position in Smithson Investment Trust which owns stakes in companies like Fevertree and Verisign.
House or Pension?
The rational answer has to be pension, but as I am British and can’t entirely escape the allure of home ownership. Both?
Crypto: Brilliant or Bad?
From my earlier answer, you can probably guess my view on this.
What Can be Done to Improve Diversity in Finance?
Fund management has a lot of work to do to improve its diversity. Perhaps the most glaring area of weakness is gender diversity, especially in light of the large body of academic research that shows that women are better investors than men. Addressing diversity must chiefly start with intake. For that reason we partner with GAIN (Girls Are Investors) which offers internships for young women in the asset management industry.
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Our engagement focus tends to be around corporate governance and capital allocation, but we prefer to engage privately with companies as we find that elicits better results. Nevertheless, we have our fair share of disappointments among the successes.
What’s the Best Advice You’ve Ever Been Given?
I’m not a religious person but I think there is a lot of wisdom in the Serenity Prayer, “O God, grant us the serenity to accept what cannot be changed, the courage to change what can be changed, and the wisdom to know the one from the other”. It reminds one to focus on what’s important.
What Would You be if You Weren’t a Fund Manager?
My dream job would be a demonstrator at the Science Museum. But failing that, I would love to teach Chemistry or Physics at secondary school
