In favour / out of favour

Neil Birrell

Premier Miton’s Chief Investment Officer

In favour; investment process and proactive strategy

It is inevitable that around year end, fund managers will reflect on the year that has passed and ponder the one that is coming. I do the same thing, partly because I write several commentaries and insight notes for the Diversified funds and more generally, which require those observations. Frankly, though, running through what has happened is not always useful or interesting, but what is coming up, is much more relevant.

However, I have spent a bit of time thinking about what has passed, not so much in 2022 itself, but more the last 3 years; particularly, how the investment team has produced very impressive performance numbers, in my view anyway, given the events through that period. Don’t worry, I am not about to reel of a stream of data; this is more about investment process and strategy.

Firstly, it is worth remembering what the last 3 years held for all investors, in fact society in general. In a loose chronological order, a global health crisis, societal lockdowns, economies collapsing as never before, unprecedented economic support packages, rapid economic recovery, more lockdowns, vaccine roll outs, re-opening of society, supply chain blockages, energy price spikes, political turmoil, rampant inflation, sharply rising interest rates, war in Europe, and a looming recession.

That is quite a list and, unsurprisingly, financial markets (bonds, equities, commodities, property, crypto currencies, you name it) all had an extreme and volatile time. To manage funds successfully through that requires one of, or a combination of, 3 things.

1. Luck.
2. One or two major decisions that go very well.
3. An investment process that can adapt to volatility and clarity of thought and execution.

In my view, number 3 is what the Diversified funds benefitted from. Although, we clearly had some luck as well, we did not make one or two major decisions at specific times that built the cumulative 3 year performance picture. That was driven by good decision making and execution throughout the stressed period for markets. I think there are key reasons for that.

Firstly, teamwork; whilst there are 5 different investment teams working on the funds, they are all aligned with one common purpose in this case. You will hear fund managers all being positive at the same time about their diverse range of asset classes or funds, that is normal and to be expected; they believe in what they invest in. But asset classes or sub-asset classes do not all behave in the same way at the same time, they do different things at different times.

With the Diversified funds, each investment team involved in their management wants the funds to perform well, their interests are aligned and this leads to open, honest, informed debate and decision making. A collegiate approach that gets the best out of all the experienced fund managers involved.

Secondly, making good investment decisions and acting on them. This may seem obvious, but in my experience, many fund managers are not enfranchised to take decisions and make changes to funds in stressed (or even quieter) markets or they are unprepared to do so. At Premier Miton, we are very much in the former camp. For the Diversified funds, that works at two levels: asset allocation and the management of the investments within those asset classes.

Thirdly, we must learn and grow. Whilst we believe our process works, we cannot stand still, markets don’t. The best example of how we have evolved our process over the last 3 years is in risk management and the introduction of new investment strategies. The investment team have worked with our independent internal risk team to understand and quantify the risks taken in the funds at a more granular level. This provides the data.

On top of this, we have looked more closely at some of the biases and factors within the equity exposure, much more than just geography and sector. Again, that helps manage fund risk profiles. We also introduced new derivatives based alternative and defensive strategies after a long period of review and back testing. These allow us to be much more focused in our hedging and approach to downside protection.

There is much more to running a range of 6 global multi asset funds than that, but I think what is described above is crucial in producing durable returns in different market conditions over time, for the Diversified funds, anyway.

Out of favour; the last 3 years

I am hoping that 2023 will bring more good news than bad, a calmer social and economic environment, and financial markets that are less driven by economic and geo-political events. I fear those hopes might be forlorn, certainly for the first half of the year. After that, things should be getting better.

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Risks

The value of investments may fluctuate which will cause fund prices to fall as well as rise and investors may not get back the original amount invested.

The performance information presented on this page relates to the past. Past performance is not a reliable indicator of future returns.

Some of the Diversified funds may experience high volatility due to the composition of the portfolio or the portfolio management techniques used.

Future forecasts are not reliable indictors of future returns.

IMPORTANT INFORMATION:

For Investment Professionals only. Not for onward distribution. No other persons should rely on the information provided.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice.

Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

A free, English language copy of the Prospectus, Key Investor Information Document and Supplementary Information Document are available on the Premier Miton website, or copies can be requested by calling 0333 456 4560 or emailing [email protected]

Financial promotion issued by Premier Portfolio Managers Limited (registered in England no. 01235867), authorised and regulated by the Financial Conduct Authority, a member of the Premier Miton Investors marketing group and a subsidiary of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.

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This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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This section of the website and the content it contains is for retail clients only and by persons who are resident in the United Kingdom [who are not US persons]. Professional advisers should refer to the Professional Advisers site.

The content of the pages of this website is for your general information only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell or purchase shares in the funds or portfolios or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

Read the full 'website terms of use' >

Disclaimer

This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

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