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 Sarang Kulkarni, Portfolio Manager of the Vanguard Global Credit Bond fund.
Which Sector Shows the Biggest Promise in 2023?
We’ve been making the case for a while it’s investment grade credit. There was a much bigger sell off in investment grade credit last year compared to other asset classes and sectors; high yield, emerging markets, even equities. As the focus of the economy shifts from inflation to growth, we expect investment grade credit will prove a lot more resilient than other sectors, as it’s an asset class that already registered drawdown last year. It’s also a great place to be earning income, so you have that alongside the downside protection.
What's the Biggest Economic Risk Today?
A recession is likely in the next few months, whether that’s later this year or early 2024. Again, it’s one of the reasons we think investment grade credit is a sensible place to be looking at right now, given its resilience.
Describe Your Investment Strategy
We use our fundamental research to identify undervalued opportunities in the credit space, across Europe, the US, Emerging Markets, and structured products. We believe it’s possible to find opportunities in any market environment, so our focus is on generating performance through “bottom up” selection rather than focusing on big “top down” macro-calls.
Which Investor Do You Admire?
I like people that have reshaped the way we think about investment. Some of those are investors, some are academics, but the names that come to mind are the likes of Harry Markowitz, Bill Sharp, Ray Dalio.
Name Your Favourite 'Forever Stock'
Given our investment style we don’t have forever holdings, because the moment something becomes fair value we sell it and then move into the next undervalued opportunity. It’s not a concept we really hang our hat on.
What Would You Never Invest In?
We’ve got a healthy scepticism of crowded trades. In fact, I have a slight phobia of crowds, so my natural inclination, whenever I see a crowded trade is to go in the other direction. But, never say never.
Growth or Value?
As a fixed income investor, I’d say value.
House or Pension?
Pension. I’d be quite happy never to go through another housing move as long as I live, it can all be a bit of a circus!
Crypto: Brilliant or Bad?
I don’t have a strong view on whether today’s coins will exist in the future, but I think in the long-term the process of innovation around blockchain and the resulting fintech has a long way to go and will have a positive influence.
What Can be Done to Improve Diversity in Fund Management?
I think we have to be prepared to take chances with people. There is a tendency still to recruit from the same sourcing grounds, whether that be particular universities, or the usual backgrounds in accountancy, legal firms, and banking. If we want to change that we have to be open minded about what fund management can deliver, and to give a wider set of people an opportunity.
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
We believe it’s important to maintain a healthy dialogue with our issuers, particularly because it informs our assessments of potential risk-adjusted returns. However, as fixed income investors, we recognise it’s a different kind of relationship than you get on the equity side.
What’s the Best Advice You’ve Ever Been Given?
Don’t let great be the enemy of good. When you’re trying to achieve the best outcome, it’s easy to get held up looking for perfection. It’s more important that you keep taking steps towards your end goal, without worrying too much about how you’re going to get there.
What Would You be if You Weren’t a Fund Manager?
I studied to be an engineer, so I think that. I like taking things apart and putting them back together. It’s kind of what I do with my portfolios!
