WEBVTT 1 00:00:00.408 --> 00:00:05.229 You're listening to Strictly Business Podcast with Lindsay Williams. 2 00:00:05.249 --> 00:00:09.951 Welcome, and today we are in conversation with Ian Cunningham, Portfolio Manager for 3 00:00:09.951 --> 00:00:11.951 the 91 4 00:00:11.951 --> 00:00:12.251 Global Strategic Managed 5 00:00:12.912 --> 00:00:18.813 Fund. I don't know how to introduce these podcasts anymore because every single sort 6 00:00:18.813 --> 00:00:20.813 of theme is the same. 7 00:00:20.813 --> 00:00:22.154 It's been such an eventful first quarter, Ian. 8 00:00:22.155 --> 00:00:27.996 I mean, it escalated once the Trump tariff announcement, Liberty Day or whatever it 9 00:00:27.996 --> 00:00:28.076 was called. 10 00:00:28.792 --> 00:00:31.254 So how has the fund performed against this backdrop? 11 00:00:31.974 --> 00:00:38.699 And what's been the detractor and what has been the contributor or contributors and 12 00:00:38.699 --> 00:00:40.699 detractors to your 13 00:00:40.699 --> 00:00:42.699 performance? 14 00:00:42.699 --> 00:00:44.699 Hi, Lindsay. 15 00:00:44.699 --> 00:00:48.486 Yeah, it certainly has been a volatile first quarter and then obviously a lot 16 00:00:48.486 --> 00:00:50.486 more volatility through the first half of April in 17 00:00:50.486 --> 00:00:52.486 particular. 18 00:00:52.486 --> 00:00:54.510 I think as we look at things as we stand today as we're speaking, 19 00:00:54.610 --> 00:00:56.892 so the US equity market is down. 20 00:00:57.524 --> 00:00:59.025 A little over 10% year-to-date. 21 00:01:00.406 --> 00:01:06.070 The strategy Global Strategic Managed is down in the region of 2.5% on a 22 00:01:06.070 --> 00:01:08.070 year-to-date basis. 23 00:01:08.070 --> 00:01:10.513 The detractors within the portfolio have generally been U.S. 24 00:01:10.553 --> 00:01:15.376 equity positions, which have been hit sort of the hardest by, as you say, 25 00:01:15.537 --> 00:01:21.040 Trump's Liberation Day and the push of the tariffs, and then obviously some of the 26 00:01:21.040 --> 00:01:23.040 other things he's been doing in terms of 27 00:01:23.040 --> 00:01:25.083 jostling with Jerome Powell of the Federal Reserve. 28 00:01:26.516 --> 00:01:30.299 We've seen positions in some other equity markets internationally doing better. 29 00:01:30.599 --> 00:01:36.343 So some of the positions we have in European equities and equities in areas of 30 00:01:36.343 --> 00:01:38.343 Asia, particularly Hong Kong, 31 00:01:38.343 --> 00:01:41.527 have performed more strongly and are up on a year-to-date basis as of today. 32 00:01:43.328 --> 00:01:44.589 But it was principally the U.S. 33 00:01:44.669 --> 00:01:46.090 equity positions that have detracted. 34 00:01:46.091 --> 00:01:51.794 And then we've seen some quite strong performing positions in other areas of the 35 00:01:51.794 --> 00:01:53.794 portfolio, so across the currency complex. 36 00:01:53.794 --> 00:01:54.236 So you'll know the dollar has weakened quite sharply. 37 00:01:54.924 --> 00:02:01.147 So the portfolio has had good exposure to the likes of the euro, the yen, the Swiss 38 00:02:01.147 --> 00:02:03.147 franc, which have all risen quite strongly. 39 00:02:03.147 --> 00:02:09.030 And it's had a very healthy exposure to defensive government bonds with limited 40 00:02:09.030 --> 00:02:11.030 exposure to credit markets and short-term 41 00:02:11.030 --> 00:02:13.231 government bonds in particular have risen in value. 42 00:02:13.692 --> 00:02:15.392 How do you approach your day these days, Ian? 43 00:02:15.393 --> 00:02:20.494 Do you get in in the morning and say, goodness me, this is exciting because I've 44 00:02:20.494 --> 00:02:22.494 got so much choice and flexibility? 45 00:02:22.494 --> 00:02:24.256 Or on the other hand, do you sit down at your desk and say, oh, no, not another 46 00:02:24.256 --> 00:02:24.376 day. 47 00:02:24.556 --> 00:02:27.578 of unpredictability on the macro and the micro level. 48 00:02:27.658 --> 00:02:29.839 So my nerves are a little bit racked. 49 00:02:29.840 --> 00:02:30.659 How do you view it? 50 00:02:31.300 --> 00:02:36.603 And given the likely, in some people's eyes, end of US exceptionalism, 51 00:02:37.063 --> 00:02:43.747 is this finally the time for global balance funds and specifically your global 52 00:02:43.747 --> 00:02:45.747 strategic managed 53 00:02:45.747 --> 00:02:45.768 fund to shine? 54 00:02:46.628 --> 00:02:47.328 Yes. 55 00:02:47.328 --> 00:02:51.731 I mean, ultimately, we've seen very different market conditions over the last 56 00:02:51.731 --> 00:02:53.731 couple of years. 57 00:02:53.731 --> 00:02:55.731 And I think that the... 58 00:02:55.731 --> 00:02:59.917 The toughest conditions we've seen for a diversified global balanced portfolio was 59 00:02:59.917 --> 00:03:00.197 the 60 00:03:00.197 --> 00:03:05.521 environment we saw about just over a year ago in 2023, where basically you were 61 00:03:05.521 --> 00:03:07.521 seeing strongly rising 62 00:03:07.521 --> 00:03:11.585 US equity markets driven by a very narrow cohort of stocks, which we all now know is 63 00:03:11.585 --> 00:03:13.585 the Magnificent Seven. 64 00:03:13.585 --> 00:03:14.587 I think ultimately, as we go forward, 65 00:03:15.088 --> 00:03:20.652 there is significant efforts to to reorder the international trade. 66 00:03:20.892 --> 00:03:23.133 geopolitical landscape by the US administration. 67 00:03:24.393 --> 00:03:28.895 And there's going to be a lot of living by sort of tweet or truth social. 68 00:03:28.995 --> 00:03:31.616 So we're going to see a lot of volatility. 69 00:03:32.617 --> 00:03:39.179 And I think ultimately, a strategy like global strategic managed is sort of in a 70 00:03:39.179 --> 00:03:41.179 better position to be able 71 00:03:41.179 --> 00:03:43.179 to deal with that. 72 00:03:43.179 --> 00:03:45.179 We have a lot of flexibility we can use from an asset allocation perspective. 73 00:03:45.179 --> 00:03:45.402 We've held a lot of dry powder coming into this. 74 00:03:45.403 --> 00:03:48.723 So we're able to take advantage of opportunities as and when they when they 75 00:03:48.723 --> 00:03:48.903 turn up. 76 00:03:49.264 --> 00:03:50.024 And we think as well. 77 00:03:50.828 --> 00:03:52.509 in terms of what's happening with the US dollar. 78 00:03:54.009 --> 00:03:56.530 The US dollar has been very, very strong in the last few years. 79 00:03:57.890 --> 00:04:04.452 And that is as weighed on total returns for a portfolio like Global Strategic 80 00:04:04.452 --> 00:04:06.452 Managed, which has more international exposure like yen, 81 00:04:06.452 --> 00:04:06.733 euros, for example. 82 00:04:07.933 --> 00:04:13.935 And we think we're likely past the sort of the peak strength in the US dollar for the 83 00:04:13.935 --> 00:04:14.016 time being. 84 00:04:14.355 --> 00:04:17.416 I mean, that can add more of a total return tailwind. 85 00:04:18.184 --> 00:04:24.930 for this particular strategy as opposed to the prior headwind it has been for recent 86 00:04:24.930 --> 00:04:26.930 years, as we've seen a lot of dollar strength over the last couple of years. 87 00:04:26.930 --> 00:04:30.455 So as you say, ultimately, volatility is far more interesting, 88 00:04:31.115 --> 00:04:38.041 presents a lot more opportunities versus some of the conditions we've seen in prior 89 00:04:38.041 --> 00:04:40.041 years where we've just seen sort of a narrow cohort of stocks driving markets 90 00:04:40.041 --> 00:04:41.604 higher while everything else struggles or languishes. 91 00:04:42.752 --> 00:04:45.855 I looked at your fact sheet, which was valid till the end of March. 92 00:04:45.875 --> 00:04:52.420 You had an allocation of 66% to global equities, 30% exposures to defensive fixed 93 00:04:52.420 --> 00:04:54.420 income. 94 00:04:54.420 --> 00:04:56.420 What's your current position? 95 00:04:56.420 --> 00:04:59.966 Because I would imagine since the end of March, it's been almost like a lifetime, 96 00:04:59.966 --> 00:05:01.966 and things may have changed a bit. 97 00:05:01.966 --> 00:05:03.966 Can you confirm or deny that? 98 00:05:03.966 --> 00:05:04.290 Yes, things have changed a little bit. 99 00:05:04.750 --> 00:05:10.695 We have, so immediately after the tariff announcements, we did take a bit of the 100 00:05:10.695 --> 00:05:12.695 portfolio's equity exposure down. 101 00:05:12.695 --> 00:05:14.695 The market didn't react. 102 00:05:14.695 --> 00:05:14.975 much initially. 103 00:05:15.875 --> 00:05:19.918 So equities were nudged down closer to the long-term average of 60%. 104 00:05:21.318 --> 00:05:27.342 We have taken advantage of adding back some equity exposure, as we saw markets 105 00:05:27.342 --> 00:05:29.342 sort of come off quite considerably. 106 00:05:29.342 --> 00:05:29.423 We did that particularly in areas like Hong Kong, 107 00:05:30.163 --> 00:05:35.946 where we see the Chinese providing more of an explicit policy put for financial 108 00:05:35.946 --> 00:05:37.946 markets out there. 109 00:05:37.946 --> 00:05:42.550 And also the Chinese are detailing quite a significant pivot towards stimulating 110 00:05:42.550 --> 00:05:44.550 consumption in the 111 00:05:44.550 --> 00:05:46.550 coming year or year or two. 112 00:05:46.550 --> 00:05:51.947 And then elsewhere, we've reduced some exposure to things like Swiss francs, 113 00:05:51.947 --> 00:05:53.947 which have rallied incredibly strongly. 114 00:05:55.309 --> 00:06:01.833 In recent times, we've taken the portfolio's position in gold out, which 115 00:06:01.833 --> 00:06:03.833 has been rallying very, very strongly. 116 00:06:03.833 --> 00:06:09.197 And ultimately, I think our central scenario is we're going to see a lot more 117 00:06:09.197 --> 00:06:11.197 volatility and the 118 00:06:11.197 --> 00:06:13.197 portfolio does maintain. 119 00:06:13.197 --> 00:06:18.013 a very healthy exposure towards defensive government bonds given although credit 120 00:06:18.013 --> 00:06:20.013 spreads have widened a little bit we think credit spreads are still a 121 00:06:20.013 --> 00:06:24.580 bit too tight given the prospective volatility and environment we're going to 122 00:06:24.580 --> 00:06:26.580 be in in the next couple of quarters but ultimately 123 00:06:26.580 --> 00:06:30.407 we'd anticipate that that sort of exposure to defensive government bonds can be 124 00:06:30.407 --> 00:06:32.407 rotated elsewhere 125 00:06:32.407 --> 00:06:34.394 into higher return seeking assets as and when the time is All right. 126 00:06:34.574 --> 00:06:38.897 I spoke about flexibility and so much choice. 127 00:06:39.158 --> 00:06:41.699 And that was sort of the exciting part of your day. 128 00:06:41.819 --> 00:06:46.362 If you're an optimist, if you're a glass half full sort of bloke. 129 00:06:46.382 --> 00:06:51.086 And when there's times like this, Ian, of course, opportunities do pop up. 130 00:06:51.766 --> 00:06:52.647 Where are you seeing them? 131 00:06:52.687 --> 00:06:56.529 If you can be relatively specific, where are you looking to add more? 132 00:06:56.629 --> 00:06:59.671 Where are you looking to initiate new positions? 133 00:06:59.691 --> 00:07:00.632 Is it geographical? 134 00:07:00.732 --> 00:07:02.473 Europe, UK, China, India, etc. 135 00:07:02.973 --> 00:07:03.673 Tell us more. 136 00:07:04.286 --> 00:07:07.990 Yes, I think, I mean, if we go across the asset classes from a currency perspective, 137 00:07:08.210 --> 00:07:12.554 we would expect the US dollar to sort of continue its path of weakening here. 138 00:07:12.574 --> 00:07:14.295 But I see things don't move in a straight line. 139 00:07:14.315 --> 00:07:18.379 It's moved very sharply in a short space of time. 140 00:07:18.419 --> 00:07:22.843 So in terms of dollar weakness, but we'd be looking to fade any rallies that we see 141 00:07:22.843 --> 00:07:22.964 in the dollar. 142 00:07:22.964 --> 00:07:27.988 So adding exposure to international currencies, I think from an equity 143 00:07:27.988 --> 00:07:29.988 perspective, 144 00:07:29.988 --> 00:07:30.390 we're willing to remain pretty tactical in the next. 145 00:07:31.050 --> 00:07:33.771 few quarters, we expect quite a lot of volatility coming through. 146 00:07:34.652 --> 00:07:41.615 So we'll likely be adding exposure to equities into significant sell-offs and 147 00:07:41.615 --> 00:07:43.615 then looking to maybe lighten up a bit 148 00:07:43.615 --> 00:07:45.615 if we see material rallies. 149 00:07:45.615 --> 00:07:50.218 And then across the fixed income spectrum, we do see opportunities in defensive 150 00:07:50.218 --> 00:07:52.218 government bonds, 151 00:07:52.218 --> 00:07:57.201 as we will likely see areas in Europe and the UK easing policy as a result of these 152 00:07:57.201 --> 00:07:59.201 tariffs from 153 00:07:59.201 --> 00:08:01.201 the US, as we'll see. 154 00:08:01.201 --> 00:08:03.201 some economic weakness coming through. 155 00:08:03.201 --> 00:08:05.725 And I think more specifically within equities, 156 00:08:06.365 --> 00:08:13.188 I think some key areas of stimulus going forward are obviously there's a lot of 157 00:08:13.188 --> 00:08:15.188 domestic stimulus coming 158 00:08:15.188 --> 00:08:15.969 through in Europe. 159 00:08:16.449 --> 00:08:21.071 And we do think this is an important pivot the Chinese are making towards 160 00:08:21.071 --> 00:08:23.071 consumption. 161 00:08:23.071 --> 00:08:25.633 So China has been heavily focused on an export model for the last couple of years. 162 00:08:25.673 --> 00:08:27.874 So we know that China has been heavily exporting. 163 00:08:28.634 --> 00:08:33.456 moving up the value chain in electric vehicles, in areas associated with green 164 00:08:33.456 --> 00:08:33.636 energy. 165 00:08:34.897 --> 00:08:37.598 They're pivoting back towards boosting consumption. 166 00:08:37.678 --> 00:08:44.200 So there's a lot of interesting consumption plays related to China, 167 00:08:44.200 --> 00:08:46.200 particularly domestically. 168 00:08:46.200 --> 00:08:50.843 It's interesting if you take out the US Treasury bond market, for example, take 169 00:08:50.843 --> 00:08:50.963 that out. 170 00:08:50.963 --> 00:08:57.686 There are still some global developed market bonds and other bonds that offer 171 00:08:57.686 --> 00:08:59.686 some sort of defense. 172 00:08:59.686 --> 00:09:02.935 And sort of linked to the US dollar as well, it's quite extraordinary the way 173 00:09:02.935 --> 00:09:04.935 that the US dollar, 174 00:09:04.935 --> 00:09:07.897 normally a safe haven as US treasuries would be, coming under such pressure. 175 00:09:09.837 --> 00:09:12.978 How does that affect your management of global currencies? 176 00:09:14.118 --> 00:09:17.999 The challenge with the dollar is the dollar has become exceptionally 177 00:09:17.999 --> 00:09:19.999 well-owned. 178 00:09:19.999 --> 00:09:23.961 So most people's portfolios now are significantly skewed towards US dollars 179 00:09:23.961 --> 00:09:25.961 and towards 180 00:09:25.961 --> 00:09:26.062 US equity markets. 181 00:09:26.762 --> 00:09:33.467 and When you start to see sort of reverberations and policymakers in the 182 00:09:33.507 --> 00:09:34.207 U.S. 183 00:09:34.308 --> 00:09:37.971 doing what are deemed to be quite wild things versus recent history, 184 00:09:38.451 --> 00:09:42.495 people become less comfortable with owning those assets and they start to bring money 185 00:09:42.495 --> 00:09:42.534 back home. 186 00:09:43.556 --> 00:09:47.299 So that's one of the key reasons why we've seen the dollar weaken more recently. 187 00:09:48.179 --> 00:09:50.201 And I think ultimately the U.S. 188 00:09:50.241 --> 00:09:55.846 economy is slowing down coming into this, and it's likely to take a bit of a hit 189 00:09:55.846 --> 00:09:57.846 from a growth perspective. 190 00:09:57.846 --> 00:10:00.512 which will cause the Fed to ease through the second half of this year, we believe, 191 00:10:00.653 --> 00:10:07.522 once they gain more confidence as to how high this short-term bump in inflation is 192 00:10:07.522 --> 00:10:09.522 going to be within the US. 193 00:10:09.522 --> 00:10:11.522 So we would say... 194 00:10:11.522 --> 00:10:16.954 So it's going to be bumpy, but we would expect the US dollar to continue to 195 00:10:16.954 --> 00:10:18.954 weaken, although it's likely overshot in the very short term. 196 00:10:18.954 --> 00:10:20.576 And we'd be looking to fade any strength in the US dollar. 197 00:10:20.917 --> 00:10:24.619 Bumpy translates to volatility, of course, and there's nothing guaranteed. 198 00:10:24.639 --> 00:10:30.603 But one of the nearly guaranteed conditions that we're going to see over 199 00:10:30.603 --> 00:10:32.603 the next few months, maybe even beyond, 200 00:10:32.603 --> 00:10:34.603 is volatility. 201 00:10:34.603 --> 00:10:35.066 This, of course, is, I suppose, ideal for you and the team. 202 00:10:35.567 --> 00:10:38.829 We've got so many different ways to take advantage. 203 00:10:39.245 --> 00:10:46.230 of it and you've also demonstrated the willingness to pull the tactical asset 204 00:10:46.230 --> 00:10:48.230 allocation lever what i didn't mention earlier 205 00:10:48.230 --> 00:10:53.095 on because i wanted to bring it into the very final question is that the fund is 30 206 00:10:53.095 --> 00:10:55.095 years old and it's got a proud track 207 00:10:55.095 --> 00:11:00.080 record but the last three years haven't been so great so what would your message 208 00:11:00.080 --> 00:11:02.080 be to current holders in the 209 00:11:02.080 --> 00:11:06.444 fund and other people other investors that may be having a look but at the moment 210 00:11:06.444 --> 00:11:08.444 sitting on the sidelines 211 00:11:08.444 --> 00:11:13.285 yes so So, ultimately, Global Strategic Managed Offers invests as a globally 212 00:11:13.285 --> 00:11:15.285 diversified portfolio that's 213 00:11:15.285 --> 00:11:19.811 aiming to deliver capital growth over the medium to long term by outperforming a 214 00:11:19.811 --> 00:11:21.811 benchmark of 60% global equities, 215 00:11:21.811 --> 00:11:23.814 40% global bonds, and it's aiming to do that over rolling five-year periods. 216 00:11:24.335 --> 00:11:26.897 As you say, the last three years has been mixed. 217 00:11:26.898 --> 00:11:32.702 So, 2022 was quite a strong year for the strategy versus its benchmark. 218 00:11:32.722 --> 00:11:36.765 It outperformed quite considerably in a down. 219 00:11:36.965 --> 00:11:38.466 on market for most asset classes. 220 00:11:38.467 --> 00:11:43.069 2023, 2024 have been much tougher for the strategy. 221 00:11:43.470 --> 00:11:47.172 It's been a tougher environment, and particularly 2023, 222 00:11:47.233 --> 00:11:52.236 where the strategy was more defensively positioned in seeking to protect capital, 223 00:11:53.397 --> 00:11:57.420 given the higher prospect of recession we deemed at the time. 224 00:11:58.381 --> 00:12:04.265 That sort of affected early 2024 as well, and then the strategy over the past year 225 00:12:04.265 --> 00:12:06.265 has been stronger. 226 00:12:06.265 --> 00:12:08.483 We've made some improvements on the equity selection side, which have been a bit of a 227 00:12:08.483 --> 00:12:08.803 drag. 228 00:12:09.183 --> 00:12:15.025 And we remain confident in the strategy's ability to use flexible asset allocation 229 00:12:15.025 --> 00:12:17.025 where it's added quite a lot of value 230 00:12:17.025 --> 00:12:17.086 over time. 231 00:12:18.247 --> 00:12:20.347 And as we say, volatile markets, 232 00:12:20.447 --> 00:12:26.790 we expect to continue and we would expect to be able to use the strategy's approach 233 00:12:26.790 --> 00:12:28.790 to flexible asset allocation. 234 00:12:28.790 --> 00:12:33.673 And as I say, at the moment, there's quite a lot of dry powder to be deployed into 235 00:12:33.673 --> 00:12:35.673 opportunities as and when we 236 00:12:35.673 --> 00:12:37.673 see those. 237 00:12:37.673 --> 00:12:39.673 emerging more fully within markets. 238 00:12:39.673 --> 00:12:43.796 And I think one other force that's maybe a little bit underestimated for global 239 00:12:43.796 --> 00:12:45.796 strategic managers is the degree 240 00:12:45.796 --> 00:12:49.457 of international currency exposure that the strategy will have on average. 241 00:12:49.497 --> 00:12:54.159 So exposure to currencies like the yen, the euro, the pound, the Swiss franc. 242 00:12:55.439 --> 00:12:57.840 And in the last few years, 243 00:12:57.860 --> 00:13:02.641 that's been quite a big headwind for the strategy in terms of total returns. 244 00:13:03.281 --> 00:13:08.025 But as we've discussed, we sort of expect that that is beginning to change. 245 00:13:08.325 --> 00:13:12.128 And we see that providing more of a tailwind for territorial returns for the 246 00:13:12.128 --> 00:13:12.349 strategy. 247 00:13:13.149 --> 00:13:13.850 Ian, great chat. 248 00:13:13.890 --> 00:13:15.131 Thank you very much for your insight. 249 00:13:15.251 --> 00:13:20.155 Ian Cunningham is Portfolio Manager for the 91 Global Strategic Managed Fund. 250 00:13:20.835 --> 00:13:27.781 The views and opinions expressed in these podcasts are those of Lindsay Williams and 251 00:13:27.781 --> 00:13:29.781 various contributors and do not reflect the policy, 252 00:13:29.781 --> 00:13:32.565 position or opinion of any other agency, organisation, employer or company. 253 00:13:32.625 --> 00:13:36.468 or company associated with StrictlyBusinessPodcast.com. 254 00:13:36.928 --> 00:13:43.913 Assumptions made on the analyses are not reflective of the position of any other 255 00:13:43.913 --> 00:13:45.913 entity other than the speaker or the author. 256 00:13:45.913 --> 00:13:50.077 And since we are critically thinking human beings, these views are always subject to 257 00:13:50.077 --> 00:13:52.077 change, revision, 258 00:13:52.077 --> 00:13:52.219 and rethinking at any time. 259 00:13:52.539 --> 00:13:54.941 Please do not hold us to them in perpetuity.