You're listening to Strictly Business Podcast with Lindsay Williams.
Welcome.
Today we're in conversation with John Stopford, Portfolio Manager for the 91
Global Managed Income Fund.
Now, John, before we get on to performance, I want to talk about
something that's very much linked to performance,
and that's the objectives of the Global Managed Income Fund,
and thereafter talk about who this fund is suitable for.
So there's two questions there, objectives, then...
suitable investors.
So objectives first, please.
Okay, so the
Global Managed Income Fund at 91 is looking to deliver a defensive total
return
driven by an attractive yield,
which is underpinned by securities paying reliable income.
And it's aiming to deliver that with low volatility,
especially in more distressed market conditions.
And then in terms of who it's suitable for,
it's essentially a defensive alternative building block for people's portfolios for
the more defensive
part of their portfolio, or potentially as an alternative to more traditional
defensive assets like fixed
income.
Okay, so it has defensive qualities and goodness me, what we're going through at
the moment,
what everyone is going through at the moment could do with a little robust
defense.
over the past 12 months I read, the fund successfully achieved its objective of
attractive income and
longer-term capital growth, which you just mentioned, and a lower volatility.
How did you do that, first of all?
In other words, what went right?
And were there a few things that went wrong?
Well, we're always focused on the objectives, and we have a clear idea about
how we go about achieving them.
So the portfolio is built from the bottom up.
We select individual securities that echo
the characteristics we're looking to deliver at the overall portfolio level.
So looking for resilient income generating securities at a reasonable price,
and then combining them to try and achieve a sort of stable or solid return with low
volatility.
In terms of what went right, I mean, actually, most bits of the portfolio did
reasonably well.
We were, I would say, relatively defensively positioned.
But we did have a bit of equity which benefited from the rally that we saw
through most of last
year into the beginning of this year
but also we actively managed and selected within fixed income and other areas of the
portfolio and that
that worked well as well so we benefited from the
rally in bond yields that we saw around the middle of the year into the third
quarter but also we were well
positioned when yields rose again by being more defensively positioned in the latter
part of last year.
Risk management now.
Do you change your risk management model or profile in terms of different stages of
market
volatility?
Obviously, markets at the moment, most asset classes, incredibly volatile.
Do you change your risk management?
Yeah, absolutely.
So overall, we're looking to be defensive.
So the kinds of securities we choose tend to be towards the more defensive end of
things.
And they're underpinned by solid income.
So they're designed to be naturally defensive, but we're targeting a low level
of volatility.
But also when market stress picks up, we will de-risk the portfolio further, either
actively,
or in some cases,
we will have bought essentially insurance in the options market to reduce risk at
times of market
stress.
And we did that last year.
Speaking of last year, 2024, Donald Trump on the campaign trail.
He warned Americans that a vote for Kamala Harris would lead to a market meltdown.
He may have been right, should Kamala Harris have become president, but we'll
never know that.
But, on the other hand, this year has seen the stock market's worst start to a
presidential term in
modern recorded history.
And people are saying it's to do with Mr Trump himself.
and there he is sitting there proud as punch and doesn't seem to...
relent.
John, does this worry you?
Yes, absolutely.
It worries me.
I think markets came into this year pretty complacent, pretty bullish about what
Trump might mean for the US economy, for US growth.
I mean, the so-called US exceptionalism trade was in full force.
I mean, I think we were always somewhat sceptical, particularly about the ordering
of his policies with some of the bad things more.
so-called stagflationary policies coming before anything that was more helpful.
But generally, obviously, we're also we tend to run things in a fairly cautious
position.
So we're naturally defensive.
We were more so coming into this year.
We've also made use of options to protect some of the downside.
And in particular, a big advantage we have is we're not driven by a benchmark.
We're not US centric in the way that most portfolios or most benchmarks are.
We're picking individual securities for their resilient income.
And so we can...
look for where the best opportunities are, and many of them aren't in the US, and we
can avoid areas that we're worried about,
which clearly at the moment is often in the US.
Yes, yes, it is.
So for how long it will last is the big question.
Now, you've spoken about your risk management stance with different levels of
volatility in the markets,
but have you actually changed any of the fund's positioning, or was its positioning
before?
the turmoil that we have endured and will continue to endure probably for a little
while.
Were these positions designed for these sort of events?
Well, to some extent, the latter is true.
And I would say we've done a bit of both.
We anticipated that Trump could be somewhat disruptive.
And so we had begun to reduce risk and reduce U.S.
exposure coming into the sort of immediate post-election period.
So in particular, we took a lot of exposure out of US fixed income,
particularly some of the sort of more traditionally safer areas, so US
government bonds.
We'd also reduced equity and focus very much on more defensive,
particularly non-US exposure within equities, which we saw as better valued
individual names in those areas.
And we've been very cautious about corporate credit where there just seemed
to be no value whatsoever.
so yeah Some of that we had done in anticipation of noise.
I think we've all been surprised just how dramatic some of the actions and
consequences have
been.
But we sort of have continued to do a little bit of that and taking advantage of
the volatility to see whether there are any areas
actually that look more interesting.
And so, you know, we've done a bit of both of those.
Do you ever wake up in the morning and have a look at your screen and say,
Goodness me, I've never seen that before.
This is a great opportunity that's presented itself.
Never mind all the bad stuff that we talk about.
We should be having a look at this.
I mean, for example, this is my example,
bond markets falling as equities fall.
I've never seen it to such an extent as we've seen it in the last few weeks, John.
You're obviously seeing opportunities.
Yeah, absolutely.
So because we aren't tied to a benchmark, we're not.
forced to own certain things, we can go out and look for where is there a genuine
opportunity,
where is something caught up in the noise or the maelstrom and appears to be, you
know, relatively mispriced.
And I think some government bonds in particular look interesting to us, because
although
Trump's policies are likely to lead to higher inflation in the US,
they're likely to lead to weak growth everywhere and potentially create an
opportunity for interest rates to fall outside
the United States.
And so markets like New Zealand, where we can find some interesting
government-related paper yielding sort of close to 5%,
similarly in Australia.
Canada looks interesting as a sort of alternative to the US in North America
with, you know,
perhaps more sensible, more orthodox policies.
And then within the equity market, you know, some of the naturally defensive
parts of the market have been out of fashion for a
while.
So in particular, some of...
the sort of consumer staple stocks, many of those actually look quite attractively
valued,
and we think give naturally defensive characteristics when people are looking
for somewhere to put their
money in uncertain times.
Investors naturally flock to safe havens when times like this confront them.
Gold is a great example.
Goodness me, I don't know if that's something that you're able to look at.
But anyway, safe haven assets.
have done well, with a couple of very notable exceptions, which we've just
mentioned.
Can multi-asset funds such as yours provide a solution amidst the uncertainty?
In other words, your fund is a safe haven asset, perhaps?
Yeah, absolutely.
We think this is the kind of environment that our strategy was designed for,
where it's very uncertain how certain assets, certain markets are going to
behave.
And in particular, I think a lot of conventional
portfolios rely on bonds as a diversifier,
as something to balance the risk of holding equities.
And that characteristic has proven pretty unreliable in recent years,
and no less so than in the current environment.
If anything, bonds are to some extent now the epicenter of risk.
They are the transmission mechanism of quite a lot of the concerns about the
policy agenda of Donald
Trump.
So, you know, having them as your...
your ballast or your defensive asset, your safe haven, you know,
looks like perhaps it's no longer appropriate.
And so you need to have something that can adapt to a changing world.
And we have the flexibility to look for safe income where we can find it.
We've got it.
That's the clear return drive we have.
We can look for those opportunities where we think they are safest.
But also part of our mandate is to run a low volatility portfolio and look to
protect the downside so
when things get particularly hairy or nervy,
we can focus more on that aspect of our mandate, protecting the downside,
but we can then also look for where are new opportunities appearing and build a
well-diversified,
well-mixed portfolio that isn't relying on the traditional bond equity mix
that most portfolios have historically because we're just not sure that that's
going to work anymore.
John, thank you so much for your time and insight.
That's John Stockford, Portfolio Manager for the 91 Global Managed Income Fund.
The views and opinions expressed in these podcasts are those of Lindsay Williams and
various contributors and do not reflect the policy,
position or opinion of any other agency, organisation,
employer or company associated with StrictlyBusinessPodcast.com.
Assumptions made on the analyses are not reflective of the position of any other
entity other than the speaker or the author.
And since we are critically thinking human beings, these views are always subject to
change, revision,
and rethinking at any time.
Please do not hold us to them in perpetuity.