Neil Birrell, lead manager of the Premier Miton Diversified fund range reflects on the 5 years since the launch of the three funds that completed the range of growth funds on 1 March 2019.
For information purposes only. Any views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
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In brief
- The last 5 years was a tumultuous period for economies and financial markets
- Records have been set that have created huge challenges for investors
- But opportunities have been forthcoming for those looking to the long term
Its been quite a ride
So much has happened since the launch of the Premier Miton Diversified Cautious Growth, Balanced Growth and Dynamic Growth Funds, to sit along side the Premier Miton Diversified Growth Fund, it would not be possible to include it all in a note such as this, even if I could remember it.
It would be easy to just stick to thoughts on economies and financial markets, but that would ignore massive societal change. The impact of COVID on the lives of ourselves and our descendants is significant, it is likely to be everlasting and I doubt very much that we have seen the full impact yet.
What has changed?
Industries that have fundamentally changed as a result of COVID including; anything office based, technology, logistics, travel, leisure, retail and financial services.
The invasion of Ukraine by Russia has also had a profound impact on the world and industry. We went through decades of globalisation which has gone into reverse, with manufacturing, agriculture and energy all changing tack as a result.
Then we have had our climate go to the top of an already packed agenda bringing yet more important changes to how we think about things and our behaviours.
It’s been quite a challenging time.
All of that has caused turmoil in economies and financial markets. I think I ran out of adjectives and superlatives to describe the situation at some point in 2022 and have just been on repeat ever since. Furthermore, the data we have seen has been record breaking for good and for bad, whether it be the depth of recessions, the spike in inflation, the jump in interest rates or in the prices of financial assets ranging from bonds (loans) issued by governments which are considered to be a very safe form of investment to Bitcoin. We are still living it; the share price rises we have seen in what have become known as the Magnificent 7 (the giant US technology and communications companies) is eye-watering.
Some examples
We will all remember the impact of COVID on the UK economy, in fact the recession in 2020 was so deep, it was the worst annual economic slump we had seen since the one caused by the Great Frost of 1709!
It was similar elsewhere, in April 2020 more than 20 million US workers lost their jobs. In 2 months the jobs gained in the previous 10 years were wiped out, bringing comparison with the Great Depression of the 1930’s.
Unsurprisingly what was going on in the real world had a dramatic impact on financial markets. Investors rushed to the safety of government bonds, such as UK gilts, and ran away from riskier investments such as company shares (equities). Although, even then investors focused on larger, safer companies whose products remained in demand and whose profits were more secure, Apple being maybe the best example. Apple’s share price surged so much and with other companies under huge pressure, its market capitalisation (the total value of its shares) became bigger than the total value of the largest 100 companies listed on the UK stock market in September 2020.
Then everything got better, COVID waned, societies and economies re-opened and started growing again, but that brought with it inflation going to levels not seen since the oil price induced spikes in the 1970’s. This time it was caused by the huge amounts of money that had been put into economies by governments and ultra-low interest rates through COVID. In order to tame inflation, interest rates rose to a level last experienced in 2007, prior to the global financial crisis.
It really has been quite a ride over the last 5 years.
Staying focussed
One thing I learnt over many years as a fund manager is to stay focused on the investment goal, whether that be the growth in the value of an investment, the provision of income or both and to remember, the long term is the timescale, not the short term. Short term market moves can be violent, evermore so, and expensive if you get them wrong, you need to be able to look through them. Clearly, taking short term action is not something to be ignored, but it is something to be undertaken on a considered basis.
Having the 4 growth funds has been a good discipline over the last 5 years, it has meant the investment team has had to consider each fund in its own right and manage it to achieve the desired risk / return profile. However, very importantly, we have to think about each one relative to the others, when it came to the amount invested in the different asset classes. I think that has been crucial in producing the investment outcomes that we have over that period.
A team approach
Investing in bonds and equities globally and property companies across the UK and Europe requires a team of specialists in those investments to do so. If you also invest in alternative investments, which could be in a range of different underlying assets such as energy storage and renewable energy or more esoteric areas such as music streaming or shipping, you need specialists at undertaking that as well. Then if you use more complex investment strategies to hedge the portfolios (this aims to mitigate the effect of adverse price movements), more specialists are required again.
Therefore, we have an experienced, specialist team to manage the underlying investments and also decide on how much we should allocate to each of those asset classes.
Let’s hope we have calmer economies and financial markets to contend with over the next 5 years.
