Prime Minister Boris Johnson’s pledge for the UK public to work from home is no excuse for funds to underperform thanks to technology that allows investment teams to trade and communicate remotely.
In a press conference on Monday afternoon, Johnson said UK coronavirus cases were approaching the “fast growth part of the upward curve”. London, the base for the bulk of the UK asset management industry, was singled out because the virus was spreading more quickly than other parts of the country.
The government website says employers should support staff to work from home “where possible” and warns the advice is likely to be in place for “some weeks”.
Invesco to leverage experience from China operations
Invesco was the only large asset manager Portfolio Adviser spoke with that has asked all staff to work from home.
“We have experience closing multiple offices, as we have done in Mainland China; we will leverage this experience in other regions as needed,” a spokesperson told Portfolio Adviser. Its teams in Hong Kong and Singapore have been working from home for over a month.
Other asset managers had encouraged working from home to some degree but were also implementing alternative measures. Schroders has split its 5,000-strong workforce into two teams with each working on alternate weeks. Aberdeen Standard Investments has adopted a similar approach except business critical teams have been split up to work across multiple sites.
BNY Mellon Investment Management is also making use of alternate sites alongside remote working.
M&G adopted flexible working a year ago and the “vast majority” are working from home during the coronavirus, a spokesperson said. It is introducing a new schedule of twice weekly live webcasts with fund managers and also stepping up written content, including with more local translations.
Fidelity International staff are working from home except for business critical functions, which are being run as split teams.
A St James’s Place spokesperson said “as far as possible, it is business as usual, although we recognise that the situation can change quickly”. It had encouraged remote working “where appropriate”, technology over face-to-face meetings and no unnecessary business travel.
All travel at Invesco has been postponed. Aberdeen Standard Investments said international travel had been prohibited and only “essential” domestic travel was allowed.
Franklin Templeton, where many staff are working from home, has additionally discouraged staff from personal travel. Like Schroders, it has adopted a split workforce with alternate working weeks. Offices are deep cleaned every weekend.
In the wealth management space, Brooks Macdonald is also having staff work from home on alternate weeks.
All stated they had adequate systems in place for investment teams to perform portfolio management tasks.
Bloomberg has seen an increase in users accessing terminals remotely, a spokesperson confirmed. The portfolio and risk analytics tool (Port) used by portfolio managers is able to be used remotely at no additional cost, they said.
FCA focus on operational resilience put to the test
Momentum Global Investment Management chief executive Ferdi Van Heerden says the Financial Conduct Authority and the Investment Association have both been increasingly focused on resilient operating models over the last two years. “Now is the time of reckoning,” Van Heerden says.
In light of the UK government’s advice, the $5.5bn asset manager is implementing a full work from home policy.
AJ Bell head of active portfolios Ryan Hughes has been questioning fund managers about their ability to work remotely for the last couple of weeks.
“Let’s be honest, this is so much easier than it would have been 20 years ago: conference calls, video conferencing, WhatsApp, Microsoft Teams, you name it,” he says. “There is no excuse for not being able to communicate and share ideas and talk about what’s going on.”
All have the ability to trade, keep funds open and maintain normal business activity, he says. “In today’s world, there’s absolutely no reason why working from home should be any excuse for poor performance.”
GDIM investment manager Tom Sparke has likewise been reassured by communications from fund managers. “We do not expect to see deterioration in terms of fund performance.”
Idea generation could be damaged during long periods of isolation
But Willis Owen head of personal investing Adrian Lowcock reckons it is preferable for investment teams to be together during times of market crisis, which the circumstances of coronavirus do not allow.
“Despite the perception that fund managers are individuals working alone, the successful ones work as part of teams and benefit from sharing ideas and debating investments,” Lowcock says. “It is this idea generation and dissection that could be lost and damaged during long periods of isolation.”
Short-term he does not expect remote working to hurt the performance of teams with “clear and well-defined” processes, although he notes some asset classes will find it tougher than others. “Property and real assets funds might suffer a bit as site visits are often an essential part of the investment process.”
MGIM’s Van Heerden admits human interaction is an important aspect of the investment process, but says the current circumstances means the industry will have to take advantage of technology to shift communications online for the foreseeable future.
If Terry Smith can do it…
Fundsmith founder Terry Smith is a good example of outperformance in a remote working situation, says Interactive Investor personal finance campaigner Myron Jobson.
“His considered buy and hold investment approach means that he is unlikely to rush to make an investment in a new holding,” Jobson says.
Qualitative analysis investment teams could suffer from the shift to online working, he says. “That is a potential hit for the screening and stock picking process where analysts usually go and meet company managers at their place, study the internal processes, inventory and technology, culture etc.”
But Hughes argues site visits for equity managers are not critical to the research process, unlike an asset class such as property.
A chance for asset managers to permanently reduce their carbon footprint
Chawton Global Investors is one boutique that already operated remotely to keep fixed costs to a minimum.
Michael Crawford, CIO at the responsible investment firm, says they use video conferencing to boast morale and keep on top of communications. Chawton’s outsourced trading partner has split its team to operate from Essex on top of its normal central London location.
He reckons the industry is in a good place to navigate remote working, given there has already been a shift towards flexible working in an effort to attract and retain talent. “A positive consequence of this terrible crisis could be that these practices became more widely used reducing the impact of business on the environment.”
