On the opportunity of bifurcation, a common pressure on fund managers and the best golf course he has ever played
In our regular video series, we interview the wealth sector’s key decision-makers to discover how they think about life, both within the world of investment and beyond it; what brought them into the business and what keeps them here; and what makes them and their companies tick
“There is lots that worries me but the opportunity is bifurcation – very different things going on in different markets and in different asset classes,” replies Peter Toogood, CIO at The Adviser Centre, when asked about the positives and negatives of his investment outlook. “So it is not all a ‘doom and gloom’ scenario.”
As for Toogood’s concerns, principal among them – as he tells Wealthwise Media editorial director Julian Marr in the above video – are fixed income, on account of a lack of spreads across subsectors, and US equities. “You walk into the new year there with the second highest P/E multiple since 2000, plus you have higher price-to-sales and higher price-to-book ratios,” he says. “So you don’t start in a good place on a valuation basis.
“Now, against that, obviously, is the same old thing about the potential for deregulation, for ‘Trumponomics – if we can call it that now – and there may be some more freewheeling approaches to markets. And then you have the rest of the world, which is not in the same place.
It is often the institutional pressure that causes the biggest challenge – this belief that a fund can continuously perform all the time, no matter what the circumstance.”
“It is not desperately cheap but, with the UK on 12x earnings and Europe and Japan on 13x or 14x, opportunities abound within those markets. So it is not 2000 in every respect – but, for someone of my age, someone who was running money in that era, there are shades of hubris and exuberance. I guess it is defined most of all by some of the enthusiasm for the ‘Mag Seven’; definitely enthusiasm for bitcoin; and, without doubt, the enthusiasm for private assets – all of which will have their own little special moment, I suspect.”
‘Extremely rare beast’
Later in the conversation, Toogood highlights how any ‘red flags’ he spots in his “constant audit” of fund managers will often stem from some sort of pressure to change style. “Asset accumulation is currently hard for the fund groups – we know that – and so the pressure to perform is an ever-constant factor in this process,” he explains. “Look at the heroes of now – the value funds that have done so well – three years ago, they were being derided as shocking and dreadful. Some of the names who are ‘top of the pops’ at the moment were on the floor.
“So it is often the institutional pressure that causes the biggest challenge – this belief that a fund can continuously perform all the time, no matter what the circumstance. The ultimate flexible fund manager is an extremely rare beast. There is a principle to running a fund, a philosophy behind running a fund – and they tend not to deviate from that. There is no such thing as the eternally winning, continuously annually-rewarding fund.”
You can view the whole video by clicking on the picture above, while the timecodes for individual questions are:
00.00: Introduction
00.57: What excites you about the current investment outlook? What worries you?
03.03: What do you most look for in an individual investment? What constitute ‘red flags’?
06.02: To what degree should professional investors be thinking beyond so-called ‘traditional’ investments? Towards what?
08.17: What drives your approach to client communications? Should professional investors aim to attract the ‘right’ type of client?
11.15: What was your path into investment – and, if you hadn’t taken it, what do you think you would be doing now?
13.02: What was the biggest investment mistake you are prepared to admit to – and what did you learn from it?
15.59: Outside of work, what is the strangest thing you have ever seen or done?
17.07: What are your best and worst-case scenarios for the future of wealth in the UK?
18.42: Two ‘Choice Words’ recommendations, please – one a book; one a free choice?
