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 time our interviewee is is Eva Sun-Wai, manager of the Morningstar 4-star rated M&G Global Government Bond fund.
Which sector provides the biggest investment opportunity in 2022?
Emerging markets - spreads have widened with renewed risk-off sentiment due to the new Covid variant, but there are pockets of value available still. A combination of factors is creating these opportunities, including strong underlying fundamentals, recent central bank policy decisions, idiosyncratic geopolitical stories, terms of trade dynamics and potential reopening trades if tourism resumes in many economies next year. These wider spreads provide an entry point.
What's the biggest economic risk right now?
Unexpected negative news flow regarding the Omicron variant causing sudden lockdowns and which halt economic growth. It is unlikely to the same extent as in 2020 due to vaccination efforts and governments as well as central banks being better prepared, but the risks of medical systems becoming overwhelmed once more if the variant spreads quickly still exist. Separately, Chinese economic growth is also a risk – if the property sector problems continue to bubble under the surface, we could see some sustained spill over effects.
Describe your investment strategy
A hybrid macro approach. We aim to have a few uncorrelated broader macro themes running through the portfolio at a high level, combined with individual valuation and fundamental analysis, for instance on specific currencies or emerging market issuers. We generally rotate between hard and local currency rates, as well as pure FX and derivative positions, depending on curve, inflation, macro, and valuation views.
Which famous investor or business icon do you look up to, and why?
Karren Brady – unapologetic woman, came from nothing, and just went after what she wanted in a male dominated world.
Name your favourite investment/portfolio holding currently
It sounds boring but we are big fans of long-term safe haven currencies – the Japanese Yen for example. It won’t make you rich, but it is a great diversifier against risk in a portfolio. Otherwise, I’m a big fan of REITs and real estate - especially logistics based - with the way the world is going you want to own securities backed by assets that support the online movement.
What would you never invest in?
Cryptocurrency assets or a company such as Tesla where there is far too much premium built in on one person.
Growth or value?
Value
Pension or property?
House
Cryptocurrency: Public enemy or pioneering proposal?
I do not like it. Economics states that the more crypto is used in the market, the higher its value should be. In reality, Bitcoin for example trades with zero correlation to its use - it is purely a volatility trade.
What can be done to increase diversity in fund management?
Where do I start. The industry should be approaching students’ pre-university level - from all backgrounds - becoming more visible and accessible, explaining to students what roles are available, what we aim to do and what skills and qualifications are useful. A diverse application pool should statistically allow for a diverse hiring base, given a fair hiring process. Having a quota filling process and/or targeting people already in the industry can help short term to make the industry appear more accessible to outsiders. But to be sustainable and build a system based on meritocracy (and not positive discrimination), the problem lies in the applicant pool to begin with.
Give us an example of engaging with a company you invested in where you were particularly proud (or disappointed!) of the outcome?
ESG in sovereigns requires a combination of qualitative and quantitative analysis. At M&G, we use both proprietary tools for minimum thresholds, alongside subjective analysis – looking at policies, regulation, and valuations at an issuer level. It is important not to simply invest in the "high scorers" and ignore the laggards, whereby usually traditional ESG scoring methods correlate with poverty. The key to ESG investing is to find those countries with a positive trajectory.
What's the best bit of advice you’ve ever been given?
Personally: "You never regret a workout."
Professionally: "Never forget that as fixed income investors, fundamentally we are investing in issuers that can repay the debt we are lending them." This sounds simple but sometimes you can lose sight of the total basics.
What would you do if you weren’t a fund a manager?
I would probably be some sort of wedding or party planner or run my own hotel or venue. I have experience in hospitality and being organised comes in useful in both fund management and trying to organise a multitude of social events! Or I’d be a personal trainer or spin instructor. I wanted to be a vet growing up, but I was rubbish at science!
