In this series of short profiles, we ask top fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they would never buy.
Our interviewee this week is Charles Stanley’s Chris Ainscough. He is the firm’s director of asset management and acts as co-manager of its Morningstar 3-star rated monthly high income funds and five globally rated Charles Stanley equity funds.
Which sector shows the greatest promise in 2022?
I think we may be at the inflection point now where the gap between the “winners” and “losers” of 2022 is starting to narrow. Clearly, the energy sector was the biggest winner of 2022, which we certainly didn’t call out earlier in the year, at the expense of the more growth and tech-focused sectors. We are aware that the energy crisis is not going to be resolved quickly, but that being late to the oil and gas party is a real risk. Preferably, we’d probably try to address both of these themes (energy and a partially decommissioned growth complex) through something like an energy transition vehicle, capturing the short-term rise in electricity prices and growth long-term structure of cleaner energy. energy.
What is the greatest economic risk today?
I would be lying if I was looking for a more attractive or niche risk than inflation and/or the central bank’s attempts to rein it in. If we were to dig deeper into this risk, it would be the persistence rather than the shock and awe of double-digit impressions that really concern us. If we see inflation expectations anchoring and wages rising accordingly, then we could see a pretty hard landing designed by central banks to reanchor them. This is not our base case, but it is now a substantial tail risk.
Describe your investment strategy
Given the above, you will appreciate the current challenging environment for our investment strategy and approach, which aims to generate returns above inflation from unconstrained multi-asset portfolios globally. I would point out a few things within that. Time horizons are important and we do not claim to seek to achieve this goal over a single 12 month period; it is a goal on the cycle. What we really want to focus on are the risk-adjusted returns we deliver throughout the cycle. In order to give us the best chance of delivering them beyond inflation, we maintain an unconstrained opportunity set. Taking my own portfolios directly, I overlay this with an implementation agnostic approach – allowing me to choose from both active and passive universes to hopefully find the best vehicle for the theme.
Which famous investor do you admire?
We really emphasize the benefits of centralized, team-based investment processes – both in our own product sets and in many of those we use with third-party managers. Choosing a “flagship manager” comes with inherent risks, which is why we much prefer strong repeatable teams and processes over large, isolated fund managers. I admire investment teams that leverage breadth of thought and input without straying from groupthink or low-conviction middle ground – because those are clearly the risks of a team versus a solo approach.
Name your favorite “Forever Stock”
With my global multi-asset hat, it’s hard to isolate a standing stock beyond a broad passive tracker to give you low-cost market exposure. We believe in active management and dynamic asset allocation, which allows us to relax our positioning and adapt to the world around us. This flexibility is what gives us the confidence to take more compelling positions than what would be a passively implemented strategic asset allocation. If I were to buy something and keep it for 30 years with no exit option, it would just be the market beta. Even the growth technologies of today can become the legacy businesses of the future in this horizon.
What would you never invest in?
Gold. This may be controversial, but I don’t see the appeal. Save it for jewelry, not your wallet.
Growth or value?
Neither! We actually had this debate within the team recently and came to the conclusion that the growth/value binary split isn’t really good enough anymore in terms of defining market segments. Some of the more mature growth stocks may now look like value plays and segment bifurcation within value is at an extreme. I think with the intangible nature of many businesses and their assets, the world has moved a lot away from traditional approaches to defining these two segments. At this point I would apply a higher quality lens to both and look to try removing it.
House or Pension?
House – but you definitely need both. House prices are unfortunately at such high levels that home ownership is a distant dream for many in the “generation rent”, but if you are able to move up the ladder it is often cheaper maintaining a home than renting and you can benefit from owning real estate for the long term. This does not mean investing all of one’s funds in buying a house and giving up one’s pension, but houses can also be used in the same way as pensions to finance retirement with programs such as the release of equity or just downsizing later in life so they can serve two purposes.
Crypto: Brilliant or Bad?
Today, most cryptocurrencies are junk, but much of the technology behind them is gold. I find blockchain and the power of distribution networks, applications and mediums of exchange fascinating. Very few are accessible or viable investments, often by design. In short, would I recommend people go out and indiscriminately buy cryptocurrencies or miners? No. Should people dig the weeds a bit and understand the technology and how it can be applied and benefit us all in the future? Absolutely.
How can we increase diversity in fund management?
There is no miracle solution ; rather, a series of small changes that hopefully will have started to improve the situation – although as a career segment, we are undeniably still very far from being representative of the general population. Our current charity of the year is open palm. It was co-founded by my colleague from Charles Stanley, Ralph McBaiden, and hopes to address some of these issues in different racial and social settings.
Have you ever engaged with a company and been particularly proud (or disappointed) of the result?
We tend to find that engagement works best when coordinated centrally and in collaboration with other market players. The larger the group of investors you can bring together, the better the chances of achieving the result!
What’s the best advice you’ve ever received?
Don’t get carried away by the noise if you’re a long-term investor.
What would you be if you weren’t a fund manager?
I would be a gardener. I just spent six months of evenings and weekends landscaping my little back garden. It’s very therapeutic.