In a year overwhelmingly dominated by the pandemic, it could be tempting to dwell on the challenges that have been presented to businesses and to global society.
Long before any of us had heard – let alone uttered – the words “COVID-19,” there was a trend towards more flexible working in many sectors of the economy, including in asset management. Some in our industry were embracing growing requests for more flexible working arrangements, while others may have viewed them with a certain degree of scepticism, pondering whether fund management was the kind of industry that could accommodate such arrangements at scale.
As much of the world went into lockdown, personal opinions on the merits and disadvantages of remote working became largely irrelevant; a significant policy decision that would, historically, have been the preserve of individual businesses was essentially taken for them.
Simultaneously, the important question as to whether a firm like ours could operate effectively with virtually all employees working remotely for a prolonged and potentially open-ended period was answered; we could, and we did. Indeed, a recent conversation with our head of dealing, Jason McAleer indicated that our industry as a whole has not only coped with the challenges presented, but has seen no perceptible increase in operational errors or issues.
In my view, the changes we have seen have the potential to make asset management a fundamentally more inclusive industry. Put simply, it now feels reasonable to hope that many of those who – for oft-cited reasons, including perceptions of long hours, punishing travel schedules and reconciling the demands of a challenging career with family life – might never have considered a career in fund management, will feel newly emboldened to take a closer look.
If, like me, you believe that more diverse investment teams are better performing ones, then this can only be a welcome development from the perspective of our clients.
Inclusivity leads to diversity
The pandemic and associated changes to working patterns and practices have also reminded us of the value of the office environment, as evidenced by numerous requests from colleagues for permission – which was generally denied, in line with the official guidance at the time – to continue to work from the office as the second UK-wide lockdown came into force.
This all begs a question: how quickly will the potential benefits of changes to working patterns in our sector filter through into the reality of the make-up of our workforce? Naturally, in a profession like fund management, hiring cycles are relatively lengthy. For this, there can be no apologies; the business of taking fiduciary responsibility of other people’s money is a serious one, and it is right that those charged with this duty should first have to prove their aptitude.
Of course, recruitment decisions are largely devolved to hiring managers; while this makes it difficult to “force” change in hiring practices from above, as CIO I am committed to continuing to challenge ourselves.
Changing behaviours: impact on markets and innovation
One of the more testing trends to emerge over the last year has been a tangible increase in direct participation in financial markets by retail investors. The exact cause of this change in behaviour is difficult to pinpoint, but we can reasonably speculate that it may have much to do with a combination of increased market volatility creating perceptions of attractive entry points, and the simple reality of the increase in available time many people have found in lockdown.
Whatever the cause, there is no doubt that such a sharp increase in activity in stock markets among individual retail investors has had an impact not only on stock prices, but also on liquidity and on sources of liquidity.
For asset managers, this potentially disruptive trend should act as something of a wake-up call; as retail investors in growing numbers show signs of exploring different ways to put their money to work, we must remain relevant, and continue to demonstrate that our products offer value.
2020: when ESG became truly “mainstream”
ESG investing is a topic that has enjoyed a meteoric rise in prominence over the course of the last year. Indeed, I would be unsurprised if, in the future, social anthropologists looked back on 2020 as the year ESG investing became truly “mainstream.” This is an overwhelmingly positive development, and one to be embraced.
From a fund management perspective, I believe that ESG in the years ahead will be a refinement, evolution and re-categorisation of many of the assessments managers already make when looking at an investment case. How is a company run? Do its activities and/or products cause detriment to the environment? Are its employees mistreated or endangered? Does it mistreat its customers in a way that is detrimental to them and unlikely to build long-term loyalty? Has it taken on excessive leverage in pursuit of short-term shareholder returns that might undermine its longer-term viability? For us, these are not new questions, but they are being asked of us by a broader range of clients and other stakeholders, and with a frequency and determination not before seen.
Such focus on these issues is having a marked effect on markets, and on the way in which capital is being allocated to investment managers. This, in turn is undeniably changing and disrupting perceptions of the characteristics of a business most prized by investors.
The “what” and the “how” of asset management
I believe that the single most important thing we can do as a business is to generate strong and sustainable investment returns for our clients. But investment and performance are not the only things about which we hear from clients, who increasingly want to know how we manage our money managers. Put another way, it might be said that in 2020, what we seek to do (generate strong, sustainable investment performance), and how we go about it have become first among equals in the pecking order of clients’ priorities.
In truth, nobody knows how 2021 will play out. With the promise that vaccine programmes may be imminently deployed, a final end to the next chapter of Britain’s exit from the EU in sight, and a the potential for a more stable geopolitical scenario, it is tempting to look forward to the coming year with a great sense of optimism. At the same time, none of us must be under any illusion over the scale of the challenges facing the global economy as the world emerges from the pandemic. Whatever happens, our focus will be on seeking to ensure we deliver the best performance we can, in the most sustainable way we can; it is this pursuit, I believe, that gives us our real licence to operate.
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About the author
Stephen Pearson, Chief Investment Officer, Jupiter Asset Management
Stephen Pearson was appointed Chief Investment Officer in September 2015, previously holding the role of Head of Investments.
Stephen started his investment career in 1986 at GT Management plc. For seven years he worked at GT as an analyst and UK/European fund manager before leaving in 1994 and following Hugh Sloane to join the start-up of the hedge fund boutique Sloane Robinson. He was the partner responsible for European equity investments, co-managing the European long-short fund as well as a specialist investment trust.
He joined Jupiter in 2001 to launch an unregulated offshore European focused hedge fund which he managed for over 10 years. Stephen has a degree in Classics from Oxford University and holds the Securities Institute Diploma.
Please note: Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the author at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.
Important Information: This document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. For definitions please see the glossary at jupiteram.com. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Holding examples are not a recommendation to buy or sell. Issued by Jupiter Unit Trust Managers Limited (JUTM) registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ are authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM. 26729
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