In the latest in our regular series, Portfolio Adviser hears from Donald Pepper, co-CEO at Trium Capital (pictured below)
Which particular asset classes and strategies do you anticipate your intermediary clients focusing on for the remainder of 2024?
Investors who have profited from the market rally may well be considering top-slicing profits to diversify into uncorrelated strategies. These may be expected to offer better downside protection in a market correction, while having the expectation to generate positive real returns with relatively low volatility in more normal markets.
Within fixed income, given the complex market conditions and rapid rate-change environment, flexible strategies remain critical and we would expect to see continuing interest in our strategic bond strategy, given its dynamic, ‘go anywhere’ approach. I will also mention convertible bonds, which are a continuing success story for us, with some key supporters of our fund in the UK intermediary market.
Should end-investors – and, by association, asset managers – be thinking beyond equity and bond investments? Towards what?
Yes. Equities – especially large-cap equities in the US – have had a tremendous run and credit spreads are very tight. Uncorrelated liquid alternatives, such as UCITS equity market neutral, macro and multi-strategy approaches, have the objective of achieving diversification while targeting returns in excess of cash and short-duration bonds. Fund targeting cash +5% are seeking to achieve approximately double the return that may be expected from passively – or actively – sitting in cash.
“Private assets may be worth avoiding in the near term, given the tsunami of capital that has flooded in.”
To what extent do private assets and markets fit into your thinking? What are the currents pros and cons for investors?
Private assets may be worth avoiding in the near term. There has been a tsunami of capital flooding into these assets in recent times. Valuation levels may be tested as higher interest rates are baked into discounted cashflow calculations and their illiquidity may not be sufficiently discounted.
Given client and regulatory pressure on charges, how is your business delivering value for money to intermediaries and end-clients?
Fair pricing is important – ‘fair’, that is, in the context of the quality of the investment solutions being delivered. A lower price does not necessarily mean a solution is better for the end-investor. My grandfather was a postmaster (not a toolmaker!) and a colleague once commented: “Why Patrick, those are expensive shoes you have got on there.” He replied: “I can’t afford to buy cheap shoes.”
“Investors are attracted by the prospect of uncorrelated returns and their capital assisting in fighting climate change. The other approach is… ‘Don’t Look Up’.”
How much of your distribution is currently oriented towards climate change, net zero, biodiversity and other segments of sustainable investing? How do you see this approach to investing evolving?
I am pleased to say Trium Capital has been a pioneer in this space. Back in 2019, we launched an uncorrelated equity market neutral UCITS strategy – the Trium ESG Emissions Improvers Fund – which has successfully engaged with high-emitting companies to encourage lower emissions, helping the war against climate change.
In 2022, we launched the Trium Climate Impact UCITS Fund – an uncorrelated equity market neutral (SFDR Article 9) strategy, predominantly focused on renewables, water, waste, circular economy, clean transportation and agriculture. Investors are currently – and will continue to be – attracted by the prospect of achieving uncorrelated returns and seeing their capital assist in fighting climate change. The other approach is… ‘Don’t Look Up’.
How are you now balancing face-to-face and virtual distribution? In a similar vein, how are you balancing working from home and in the office?
Nothing beats face-to-face, but Zoom meetings are an increasingly useful means of communication – as are webinars, videos and other forms of digital communication. Our ‘Trium Talks’ blog, for example, has seen a sharp increase in subscribers and has generated good interactions with clients – both online and offline.
We know our colleagues appreciate flexibility when it comes to remote working, and we are supportive of this. We are open to colleagues working up to two days from home, although most colleagues are typically now in the office four days a week.
What do you do outside of work?
A large part of my weekend is as an unpaid ‘Uber driver’ for my three sporty teenagers – with no prospect of a tip! Away from this, we are pretty sociable and enjoy the theatre. Most recently, Michael Sheen in Nye, Billy Crudrup in Harry Clarke, and James Corden and Anna Maxwell Martin in The Constituent were all outstanding.
What is the most extraordinary thing you have seen?
We decided to celebrate New Years Eve in 2000 in Antarctica. Some miles away from land, after a rough Drake Passage, the sea calmed and we saw an entirely lone windsurfer carving through the waves, between the icebergs. Really incongruous!
Looking a little further ahead, in what ways do you see the asset management sector evolving over the next few years?
The barbell of low-cost, functional, index products on one side and higher-fee, high-alpha solutions on the other side should continue. We expect to see more consolidation of firms, followed by more boutiques emerging, followed by more consolidation, followed by more boutiques emerging.
