Glass half empty
In terms of Tcam’s investment style, Bathgate admits it tends toward the defensive, given the long-term nature of its business model, though he’s quick to add that the firm is “very risk aware without necessarily being risk averse”.
But these days Bathgate tends toward a more cautious position, reinforcing his portfolios with put protections and snatching up relatively cheaper defensive assets at a time when many industry peers are still chasing the reflation trade.
“The good thing about put protection is it’s cheapest when everyone is most optimistic,” he says.
“I think we are still 18 to 24 months away from any significant kind of correction but, at the margin, we think it makes sense to be a bit more defensive.
“Being glass-half-empty Scots, we’re constantly looking at the downside in things, not at the expense of upside, but we really want to understand risk before we invest.”
Despite erring on the side of caution recently, Bathgate is a self-proclaimed contrarian, trying to suss out opportunities in corners of the market where others are too unadventurous or timid to look.
He says he has “rotated substantially back into value stocks”, ignoring the fact that the current climate has largely favoured growth over value so far this year.
Bathgate is also a huge fan of long/ short equity-targeted return-type vehicles, such as Old Mutual’s Global Equity Absolute Return Fund, which many have complained are far past their sell by date.
“That usually means it’s the best time to invest,” says Bathgate.
He also has products from some lesser known names on his buylist, including LGT Capital, BlueBay Asset Management and Paris-based Axiom Alternative Management, which invests in subordinated bank debt.
“We are quite happy to take sizeable stakes in lesser known managers if we can be assured of the underlying liquidity characteristics of the asset class, because we tend to get much better access, rates and, ultimately, much better performance.”
Concerns over liquidity and rising inflation have prompted Bathgate to seek out shorter-duration fixed income instruments.
He thinks there is a chance history could repeat itself, and a sharp unexpected interest rate rise could see the bond markets unravelling as they did in 1993 and 1994.
