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 week our interviewee is Andrew Hardy, director of investment management at Momentum Global Investment Management, where he oversees funds including the Morningstar 3-star rated VT Momentum Diversified Cautious Fund. He also oversees VT Momentum Diversified Balanced Fund, VT Momentum Diversified Moderate Fund, VT Momentum Diversified Income Fund, VT Momentum Diversified Growth Fund.
Which Sector Shows the Biggest Promise in 2022?
We’ll probably look back on the Fed pivot in late 2021, as marking the beginning of a new era in markets, leaving behind the post GFC period of low inflation and low rates, beginning a more normal period of higher rates and higher volatility. As with this year, that should mean more dispersion which is good news for active managers across most risky asset classes, thus increasing the opportunity cost of passive investments. One funds sector that stands to benefit relatively more than others from this is hedge fund strategies, by isolating that alpha from the beta.
What's the Biggest Economic Risk Today?
Inflation. The peak for headline inflation is probably near, but the second-round effects of this prolonged surge in prices means core and wage inflation may prove hard to bring back to target. History shows that once the inflation genie is out of the bottle it can take a long time to get it back in, as expectations of higher prices become entrenched. That isn’t our base case, but a tail risk that cannot be discounted and which would lead to much more downside in equity and bond markets, as market pricing currently implies inflation coming steadily back towards targets in the next few years.
Describe Your Investment Strategy
Multi-asset and multi-specialist. We target specific real-return outcomes for investors over appropriate time horizons, whilst smoothing the journey along the way. We have a long term, valuation-based approach to asset allocation and populate the portfolio with best in-class specialists from all over the globe, to capture additional return from the inefficiencies that persist in markets and to build in true diversification.
Which Famous Investor Do You Admire?
As multi-managers we're in a privileged position to be able to go toe-to-toe with many of the best investors from around the world, and over my 16 years in the industry I've met many incredible investors… The ones I have the most admiration for are those who've backed themselves and gone out on their own, setting up their own business to create the sort of stable, focused and motivated environment which so often serves them and their investors best. No matter how good the investor, it takes a bit of luck to make it a success though, so full credit to those who take the chance.
Name Your Favourite "Forever Stock"
I'm all for a long-term approach, but no stock should be forever! There is a price for everything, regardless of how good the business may be. However, if I were being banished to a desert island, I’d choose a portfolio of high-quality emerging market businesses; the Aikya Emerging Markets fund would be top of my list.
What Would You Never Invest In?
A manager who says they have "forever stocks!". Whatever the investment style, sell discipline is a crucial part of the process. If you can't identify circumstances under which you'd sell a position, and institute a process that is logical and consistent, then myriad behavioural biases can take over and outweigh the benefit of good buying decisions.
Growth or Value?
Value! A valuation discipline needn’t preclude you from buying a ‘growth’ business, if the price is right. Similarly, value doesn't have to mean low growth, low quality or high risk; it can just mean out of favour and underappreciated. I believe we're in the early innings of a multi-year recovery for the value style.
House or Pension?
House: my family can get far more pleasure and utility out of that over the next few decades than a pension! It can, and should, form part of your retirement plan anyway.
Crypto: Brilliant or Bad?
There’s huge potential in blockchain technology, but I would not invest in cryptocurrencies. They can only be considered as highly speculative for now and cannot compete with far more established assets, like gold, for reliability in a portfolio context.
How Can We Increase Diversity in Fund Management?
Increasing female representation deserves particular focus; the industry would benefit greatly from better balance. There are far too few women being recruited at entry level, with estimates that females represent only 20% of applicants to the industry in the UK. One small step is that companies should revaluate where they source their Interns from; start by fishing in a more representative pond.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
We maintain a detailed knowledge of and close relationships with our investee managers and companies, which usually results in good engagement outcomes when an issue arises. A recent example of successful engagement was with Gore Street Energy Storage, where the company sought approval to materially increase their leverage limit. We shared our concerns with the manager and chairman, who valued our input and provided assurances that they would seek further shareholder approval prior to using the additional headroom.
What's The Best Bit of Advice You’ve Ever Been Given?
The advice I fall back on most is to stay uncomfortable, to keep pushing yourself and growing. Consciously positioning yourself outside of your comfort zone on a regular basis, and the mindset that puts you in, ensures you keep accepting new challenges and develop so much more that way.
What Would You be if You Weren’t a Fund Manager?
I would probably go down the photography route, although I suspect I enjoy it far more as a hobby and would miss so many aspects of the investment management industry!
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