Four things worth remembering
Recently, I’ve been considering my life and the path that has led me to where I am today. I am more than likely closer to my death than my birth and closer to the end of my career than the beginning. Happy thoughts indeed!
Now, before I head into depression at the thought of it all “being downhill” from here, I can take a great deal of positivity from how my life has panned out thus far. I have always tried to remain positive in my outlook, because generally I believe that a positive outlook leads to positive results. However, achieving positive results is not always easy, as there are many different factors over which you have no control. But, as my parents used to tell me, you can only do the best you can.
So what has all of this to do with my role as an Investment Specialist covering UK equities? Well, to answer that, I have looked back at some of the simple lessons I have learned from my varied roles on what has been a very varied career path! I would happily bore you all with my life story over a pint, but one of the most important things I have learnt in business is to identify—and mitigate—risks as far as is practicably possible.
In asset management, one of our biggest responsibilities is to directly, or indirectly, look after the assets of individuals who have saved hard to ensure that they can retire, cover the costs of any healthcare needs and enjoy the opportunity to do things that perhaps they have not been able to do during their working lives. With such an important responsibility, I believe that there are four strategies we should always keep in mind.
1. Do what you say you will
When investors choose a fund they invest on the basis of an understanding of how you will manage their assets. If you manage a growth fund, then you are likely to underperform in a value market and vice versa. An investor, therefore , should not be surprised at underperformance if the market environment is not supportive of your style of investing.
2. There is no “I” in team
When it comes to repeatable success people are important but no one is indispensable. Whether it be a fund manager or, indeed, any high performer in a business, key person risk is indeed that. A risk. Our process ensures that if any of our fund managers leave the team, it will have as little impact as possible on the management of any of our strategies.
3. Diversification is key
The benefits of diversification have been drummed into me throughout my career yet there seems to be a desire for highly concentrated portfolios. I firmly believe that you can still have conviction without restricting yourself to a 20 or 30 stock portfolio. That is the benefit of the UK equity market, which includes—in my opinion—some of the greatest businesses in the world.
4. Always manage risk
Risk management has never been thought of as glamorous and is often given lip service if things are going well. However, risk management should be at the forefront of investors’ minds ALL of the time, not just be spoken about in the tricky times. High risk has the potential to deliver a high return, but it can also deliver some pretty negative outcomes.
It is generally accepted that there will be a slowdown at some point. When the economy slows, I think these four areas should be at the forefront of investors’ minds. Although things might get difficult, I believe that those who stick to what they know generally weather the storm (and I have been through some big market events throughout my career). Those that panic and take more risk, tend to suffer.
As I head into the exciting second half of my existence, I remain positive, as I have realised that many of the lessons learnt in the first half of my life will make my remaining years a great deal easier!
Andrew Robbens is an Investment Specialist within the J.P. Morgan Asset Management UK equity team.