How has the coronavirus affected your day-to-day work?
I work from home one day a week anyway so it’s not too much of an adjustment for me to do it full-time. In many respects, I’m enjoying not having to do my two-hour commute each way while also getting to spend more time with my family – even if I wasn’t planning on doubling up as a home school teacher at the same time! From a day-to-day perspective, we have great technology to use so being in touch with my team and the fund managers we use is just as easy as if I was in the office.
What has been your biggest contributor to performance since the coronavirus hit markets? What has been your biggest detractor?
Just before the crisis hit, we added the Invesco 7-10yr Treasuries ETF to the portfolios as a hedge against volatility and this has worked out really well, growing by nearly 20% over the past month. Our exposure to Janus Henderson UK Absolute Return has also protected very well, proving there are some decent absolute return funds out there. Negatives have definitely been our exposure to value with Dodge & Cox US Stock falling sharply as its exposure to the energy sector hit hard.
Do you have any behavioural mechanisms in place for navigating the market volatility?
We are long-term investors and believe in the importance of following that through in our own behaviours. It’s human nature in times of stress to feel like you should be doing something when, in reality, doing nothing is very often the best course of action. As a result, I’m very conscious that actively deciding not to change the portfolio is an active decision in itself. Chasing returns in volatile markets is often a recipe for disaster.
What has surprised you most about markets during the coronavirus sell-off?
The sheer speed and savage nature of the self-off is like nothing I’ve seen before – but then, this is unlike anything anyone has seen before. Nobody could have foreseen that, within about a three-week period, the entire global economy would effectively shut down.
What feedback have you had from clients since the coronavirus sell-off?
The vast majority of the money we manage is from advisers and therefore they understand the nature of investing. It’s been encouraging to see how calm our clients have been and that they understand our approach and how we invest.
What are the key messages you want to hear from your holdings at the moment?
We’ve been having lots of calls with the managers we use and the key thing we want to see is that they are sticking to their investment process. A large part of my job is portfolio construction and therefore each manager has been selected to do a specific job in the portfolio. We want them to demonstrate they are sticking to their core capabilities and remaining calm and rational. This links back to the way we analyse our managers, not just from an investment perspective but also from a psychological perspective too.
How does this compare to other market sell-offs you have managed money through?
The speed of the sell-off has been unlike any other crisis in my 20-year career. No two crises are the same and our industry spends an inordinate amount of time trying to identify the next catalyst to bring down markets. I’m not too sure many people had a global pandemic high up their list of risks and therefore this is a healthy reminder that, no matter what you plan for, the risk of a ‘black swan’ event is always lurking in the background.
How do you find working remotely during volatile markets?
I think communication becomes doubly important during volatile times – both within your team and with your clients. I have a call with my team each morning to run through what we have on and what we covered yesterday just to try and replicate some of the informal communication we would have at our desks. Volatility can also be unsettling for less experienced team members and therefore helping them understand what is happening is also important.
What do you do for fun when you take a break from working at home?
Aside from now being a home tutor to my 10-year-old daughter, I think it’s really important to get outside, so I look to take a break in the garden and switch off from the world for 15 minutes.
What is your favourite snack when working from home?
Unfortunately, I’m a terrible snacker and can’t resist raiding my daughters’ treats box for a chocolate biscuit all too often. Frankly, the sooner I eat them all the better, as then there will be none left! I fear I maybe a stone heavier when this lockdown ends.
Do you have a ‘top tip’ to share on working remotely?
When working at home, it’s easy to forget to talk to people. So, my top tip is instead of sending an email, pick up the phone and call someone. It’s amazing how much more you get from a conversation and it’s great for your mental health too.
Ryan Hughes is head of active portfolios at AJ Bell
