On simplicity, correlations, good and bad AI and appreciating a nice bridge
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
Simplicity is an underrated element of investing, argues Fidelity International MPS portfolio manager Caroline Shaw. “A red flag for me has always been something I do not understand – or something that is overly complex,” she tells Wealthwise editorial director Julian Marr in the above video. “There is a lot to be said for keeping things incredibly simple.
“So I am looking for things that are simple to understand – for example, where the drivers of the investment returns are easy to understand. And, if we are looking at a manager, where the philosophy of that manager is simple, clear, easily explainable – all those sort of things. It is an underrated aspect, simplicity.”
That theme carries on into the question of whether investors – and, by extension, their advisers – should be looking beyond the more traditional asset classes and towards alternative investments. “They absolutely should be – and they should already be,” states Shaw. “I think the move has already happened – and it is because of correlations.
“When I look back at my career – which is 20-plus years, so far – for most of that time, the bond-equity correlation was negative. I am not saying it was easy to manage money – but it was maybe a bit easier than it is now, with the bond-equity correlation more positive.
“I think we are in a period where, if you have only got bonds and equities, you are in deep trouble. It was illustrated really well in March because everything went down. Even that resilient asset of gold that had done so well over the last couple of years went down.”
This boom in AI is going to lead to more demand for copper while we have seen prices in nickel and aluminium go sky-high through the Strait of Hormuz constraints.”
That being so, where should investors be looking in the alternatives space? “We like commodities, more broadly,” Shaw replies. “I mean, in March the only game in town was oil and the oil price – and so broad commodities, with exposure to oil and gas prices, was helpful.
“We like industrial metals as well – so leaning into the electrification trade, effectively. This boom in AI is going to lead to more demand for copper while we have seen prices in nickel and aluminium go sky-high through the Strait of Hormuz constraints. So we think commodities have a place in a well-diversified portfolio and, without them, the portfolio is at risk with this correlation.”
Is it just the real-assets side of alternatives that interests Shaw or, at least in this area of investing, would the Fidelity MPS team consider anything more complex? “There is a scale of complexity,” she observes.
“We do have some long/short equity funds – assets that give you maybe the idiosyncratic risks of the equity market, but without the broad beta. And the same in bond land, while really keeping it quite simple. There are some very complex – and expensive – products out there but we tend to steer clear of those and try and construct solutions ourselves.”
Explaining risk
Finally, how would Shaw explain risk to someone who does not work in investment? “I started my career in wealth management so, effectively, the business was doing that all the time,” she replies. “If I was to explain risk to one of my children or a relative, though, it would be more about the risk that you do not get to do the things you were planning on doing.
“There is the loss-aversion point on risk, of course – which I think you can definitely clarify to somebody quite easily. When you put a sterling amount on it, how much are you prepared to lose? That focuses people’s minds and, from that, you can really get an understanding for how tolerant people are – even in the longer term – to losing money. But the flipside is the trade-off, isn’t it? And it is about what happens if you cannot get to do what you wanted to do. So I would couch the idea of risk in real-world analogies.”
A full transcript of this episode can be found after this box while you can view the whole video by clicking on the picture above. To jump to a specific question, just click on the relevant timecode:
00.00: What excites you about the current investment outlook? What worries you?
01.33: What do you most look for in an individual investment? What constitute ‘red flags’?
02.22: To what degree should professional investors be thinking beyond so-called ‘traditional’ investments? Towards what?
04.43: How would you explain risk to someone who does not work in investment?
05.51: Do you see AI as a threat or an opportunity to professional investors – or both?
09.10: What was your path into investment – and, if you hadn’t taken it, what do you think you would be doing now?
12.00: What is the biggest investment mistake you are prepared to admit to – and what did you learn from it?
13.23: Outside of work, what is the strangest thing you have ever seen or done?
14.23: What advice would you have given your younger self on your first day in this business?
15.37: Two Choice Words recommendations, please – one a book; one a free choice?
Transcript of Choice Words Episode 36:
Caroline Shaw, with Julian Marr
JM: Well, hello and a very warm welcome to another in our series of ‘Choice Words’ videos, where we get to speak to the leading lights in UK fund selection and UK fund research and find out what makes them tick. I am Julian Marr, editorial director of Wealthwise Media, and today I am delighted to be talking to Caroline Shaw, portfolio manager on Fidelity International’s MPS range. Hello, Caroline.
CS: Hi, Julian.
JM: Thank you so much for doing this. Let’s jump straight in – what excites you about the current outlook for markets? What gives you pause for thought? (Editor’s note: This interview was recorded on 21 May 2026.)
CS: I think it is more ‘pause for thought’ at the moment, maybe. There are always worries but I suppose there are a couple of things that are preoccupying my mind at the moment. First, it would be the Middle East conflict and the Strait of Hormuz. It is more the duration of that and understanding whether – or when – we will get to this tipping point where we get demand destruction and growth gets impacted.
So that would be the first worry and I suppose the second worry – which also sort of leads to the excitement bit – is the ‘big tech’ AI story and the continuation of this trend that is driving markets. And just in terms of, Was April exciting? Well, yes – in that we saw the semiconductor segment of the market go up 50%. But software was below 20% – so we are getting this real dispersion.
So it is quite an interesting part of markets – and then, when we look forward, we are thinking about these IPOs coming up this year. So exciting and worrisome, maybe, in the same breath.
Keep it simple
JM: Nicely done. Good start. Let’s focus in now on individual investments – what do you most look for when you are buying, and what do you think constitutes red flags?
CS: A red flag for me has always been something I do not understand – or something that is overly complex. There is a lot to be said for keeping things incredibly simple – and I am a person who likes simple.
So I am looking for things that are simple to understand – for example, where the drivers of the investment returns are easy to understand. And, if we are looking at a manager, where the philosophy of that manager is simple, clear, easily explainable – all those sort of things. It is an underrated aspect, simplicity.
Bond-equity correlation
JM: Fair enough – and an interesting segue, perhaps, into my next question. To what degree do you think investors – and, by extension, those who advise them – should be looking beyond ‘traditional investments’, such as cash, equities and bonds and towards more alternative investments. I am using the term very loosely there – and in what sort of areas?
CS: Investors absolutely should be – and they should already be. I think the move has already happened – and it is because of correlations. When I look back at my career – which is 20-plus years, so far – for most of that time, the bond-equity correlation was negative. So I am not saying it was easy to manage money – but it was a bit easier than maybe it is now, with the bond-equity correlation more positive.
I think we are in a period where, if you have only got bonds and equities, you are in deep trouble. It was illustrated really well in March because everything – including gold – went down. So even that resilient asset of gold that had done so well over the last couple of years went down – so, really, what else do you need in your portfolio now, aside from cash?
We like commodities, more broadly. I mean, the only game in town in March was oil and the oil price – and so broad commodities, with exposure to oil and gas prices, has been helpful. We like industrial metals as well – so leaning into the electrification trade, effectively.
This boom in AI is going to lead to more demand for copper – so copper and industrial metal. We have seen prices in nickel and aluminium go sky-high through the Strait of Hormuz constraints. So there are linkages to that worry I mentioned earlier – but, yes, we think commodities have a place in a well-diversified portfolio and, without them, the portfolio is at risk with this correlation.
JM: So, for you, it is more the real-asset side of alternatives, rather than anything more complicated?
CS: Yes. We do look at more complicated things – but, you know, there is a scale of complexity. We do have some long/short equity funds – assets that give you maybe the idiosyncratic risks of the equity market, but without the broad beta. And the same in bond land, while really keeping it quite simple. There are some very complex – and expensive – products out there but we tend to steer clear of those and try and construct solutions ourselves.
Real-world analogies
JM: That is very interesting and leads on very nicely to my next question – it is almost like I plan these things! You can talk about communications more broadly here, if you like – but the question I was going to ask is, How would you explain risk to someone who does not work in investment?
CS: I started my career in wealth management so, effectively, the business was doing that all the time. You are talking to the end-client – not just, as I do now, speaking to lots of IFAs and intermediaries. For me, though, if I was to explain risk to one of my children or a relative, it would be more about the risk that you do not get to do the things you were planning on doing.
There is the loss-aversion point on risk, of course – which I think you can definitely clarify to somebody quite easily. When you put a dollar amount on it, how much are you prepared to lose? Or a sterling amount – how much are you prepared to lose? That focuses people’s minds.
From that, you can really get an understanding for how tolerant people are – even in the longer term – to losing money. But then the flipside is the trade-off, isn’t it? And it is about what happens if you cannot get to do what you wanted to do. So I would maybe couch the idea of risk in real-world analogies for people.
Focus the mind
JM: Very good. You mentioned AI earlier, as an investment, but perhaps more in work terms, to what degree do you think AI now affects the life of professional investors – negatively, positively or bit of both?
CS: I think it is a bit of both – though it may be too early to reach a firm conclusion. So have I got concerns? For sure. And I think it is because I started my life in finance as a junior – and, as a junior, you do lots of mundane tasks that you learn a lot through doing and you have time as you are doing them to think about things. So you are going down rabbit holes with research, you are building spreadsheets – and you are doing a lot of jobs that could now potentially be taken over by some form of AI tooling and replaced.
So I am not sure what that means for, not only the ability to think and analyse and reason as you go forward, but also that power of recall that maybe you now don’t have because it was all given to you via an AI tool. So I suppose I have concerns about what the industry might look like in 20 years’ time, if people maybe don’t have that training ground.
But then, on the flipside, am I using AI in my job? Yes! And daily now, unbelievably – and, if you had asked me six months ago, it wouldn’t have been daily. So this has changed very fast and we are embracing AI tools at Fidelity, which is exciting.
So is it helping me? Yes. Although it is not replacing some of the thinking time – it is maybe just giving me more thinking time by filtering a lot of the noise we get, or helping me deal with the volume of information that comes in. But I think my own development is going to have to keep going on that – my own learning will keep going and will hopefully become more effective over time.
JM: Very interesting. Presumably you are not turning round to ChatGPT and saying, ‘Can you just come up with a decent portfolio? I’m off to lunch!’ How are you using AI more specifically?
CS: I mean, there are lots of people using it in different ways – and I am probably the least technical of the people at Fidelity! Still, as an example, I get a lot of emails every day and they have a lot of research attached to them. So I might just interrogate my inbox and say, Bring me everything that has come in over the last two weeks on robotics – I want to understand how physical AI is being manifested in the robotics world so find me all the research on that.
And then I just get a nice summary with sources of where to go for that – and I do that multiple times a day sometimes because I do not necessarily have time to read the massive amounts of research that is available to us. So it helps focus your mind a little – and the good thing we are doing internally is being able to run that search across all our analysts’ research. So that is quite exciting as I can interrogate that too.
JM: That sounds very positive. I seem to spend my life just being angry at AI – ‘Looks like you are writing an email, do you want any help?’ No – I do this for a living!
CS: Yes – I have not gone down that road yet and I am not in the sort of role where I have to write too much like that. So, you know, that whole phrase of ‘AI slop’ springs to mind – and I don’t want to be reading a lot of AI slop either because there comes a point where you are worrying about the quality of the content you are receiving. So yes, I think we need to be mindful about the direction of travel.
Financial after engineering
JM: Well, pre-AI, what was your path into investment and, if you had not taken that path – in an alternative universe – what do you think you would be doing now?
CS: I’m not sure anyone has a clean path into investment. Maybe it is cleaner these days but mine certainly wasn’t. I was late to investment – I think I started my career in my late 20s – but my dad has been a massive influence in my life and certainly got me into stocks and shares investing when I was in my teens.
You will remember the ‘If you see Sid, tell him’ privatisation campaigns of the 1980s – and, while I was not involved in that, my dad certainly introduced me to the shares and I had a small portfolio of building society shares that had demutualised, as well as BT and British Gas, which I sold when I graduated to pay for some uni debt.
So I suppose that got me interested in it – as well as my dad insisting I documented my pocket money from age nine in a little book! Plus I had a part-time job from 13 – so I was aware of what money was doing. But I was a civil engineer.
I graduated as an engineer and built a road in East London and really enjoyed working outside and being an engineer – and then, one day, I just decided that was enough and I wanted to try something new. I quit my job halfway to being a chartered engineer. I phoned my dad and told him and, to his credit, he said nothing negative – to me, at least! – because I was off to Australia without a job or a plan.
But when I came back from Australia a couple of years later, it was the dotcom bubble – in 1999. And what was racing away? Tech stocks. What was exciting? Tech and finance. I didn’t fancy tech so much so finance it was and I started at the bottom and kicked off professional qualifications. It all stems from that, really – but I was a late starter.
JM: That leads into something I have been thinking about. I happen to be a lawyer by training and you are an engineer by training. I was reading an article the other day about how the problem with politics at the moment is that parliament is currently filled with lawyers, who are good at arguing but never agree about doing anything – whereas actually, if it was full of engineers, we would get a lot more stuff done in the world. Well, engineering is a new approach to MPS – but that is solution-based, which is what you want, really isn’t it?
CS: You need balance with any team, don’t you? To actually get things done, you need a bit of all the skills. So I think I bring a different perspective, maybe, to some of my finance-educated colleagues, which is fine. I think it’s just different – you need a balance.
JM: And was your dad in finance?
CS: No, my dad was an engineer – so I probably broke his heart, really! He was a civil engineer and I sort of followed in his footsteps and then said ‘no’. Though he has always had a real interest in finance, so it is something we share now. The conversations are … well, sometimes they are about engineering. I still like it – you know, I go on holiday and look at bridges!
JM: Well, everyone has to have a hobby, I suppose!
Lesson in overexuberance
JM: What is the biggest investment mistake you are prepared to admit to? And did you learn anything from it?
CS: I mean, you have got to learn from your mistakes. I suppose I will go back to the dotcom bubble because it was a time when it was very easy to get carried away – and I was certainly one of those people who got carried away! I was one of the ‘lucky’ private investors who got 35 shares in Lastminute.com. It was an IPO that was heavily oversubscribed so, helpfully, they limited me to only 35!
I had only just got my job in finance – so I had literally been unemployed for 18 months. When I say ‘unemployed’, I was travelling, so I had no money – but I put some money into Lastminute.com and thankfully it was only £140 or whatever it was in the end. But the day the company listed, the share price rocketed and everyone was very excited – but of course, in those days, you just didn’t know, did you? You just didn’t get prices live in the same way and you couldn’t trade shares easily.
And I was laughing as I thought about this because I would have had to go to the bank up the road and sign a piece of paper and someone would have had to make a phone call to trade the shares – so it just wasn’t as easy to exit, I suppose. Anyway, I held on and four weeks later it was half the price – and two weeks after that it was at 30% of the IPO price. So that is a big lesson in overexuberance and getting carried away with a narrative – so yes, I guess that is something I learned the hard way with, thankfully, not much of my own personal money.
JM: But enough, for sure.
Bright spark?
JM: Everyone’s favourite question in these interviews now – outside of work, what is the strangest thing you have ever seen or done?
CS: I had a good think about the definition of ‘strange’ here. And I do like to travel and I do like to do quite a lot of activities – sporting or adventurous – that maybe could be defined by some as ‘strange’. I snorkelled across the tectonic plates in Iceland in February – that was pretty chilly and pretty strange! But the strangest thing I have seen – and it maybe leans into a health and safety issue as well – is a guy on a boat in Fiji in the 1990s.
We were in the middle of the ocean – two hours from land – and the engine was sputtering. There were about 10 of us on this little speedboat and he needs to refuel the engine so he syphons the fuel from his tank – setting up the syphon with his mouth – at the same time as having a cigarette lit in his other hand! And we were looking for the lifejackets thinking, We need to know where they are! Anyway, we made it – but quite an adventure.
Network effect
JM: Good answer. We are zipping through here. Two more questions and a short one first – what advice would you have given your younger self on your way into this business or on your first day?
CS: I am not sure I would have listened to myself! Still, it would probably be around building connections and networks. You do the technical learning but I was lucky to have a boss who really emphasised the client side of things – that client experience – but also the relationships with other people and I think I did take that away. I am not perfect at that but I did take it away that those things are really important too.
I am not saying I would have listened if I had spoken to myself – but I have always had a strong work ethic and, I guess, that propensity to say ‘yes’ to an opportunity. I have always done that and been a risk-taker in that sense. Maybe if someone had said, Sometimes you need to say ‘no’ – that would have been helpful too.
JM: Networking – one of the few things, hopefully, AI cannot take from us. Maybe it is a bit too meta that you are able to go back in time once to say, Can you just listen to the person coming back in time next? And then you just get a break in the space-time continuum.
Workplace dynamics
JM: Last question, then – before I get too Star Trek-y – we call this series ‘Choice Words’ because of what you do for a living but now we are looking for two personal choices. Ideally one would be a recommendation for our viewer – God bless him or her – for a book, which can be investment-related, but does not have to be. The second one is a free hit – anything you like.
CS: OK. I have always found books about psychology and the way our brains operate quite interesting. So my book pick is Emotional Intelligence by Daniel Goleman and I think it has aspects of that. It is pretty timeless but it resonates at different parts of your life – for example, there is a chapter on parenting, which is quite interesting, and quite a lot about behavioural finance.
There is also a lot about workplace dynamics, though – how people interact and how people with higher emotional intelligence can be better leaders and can make better decisions – and I suppose that becomes very interesting as you progress your career. So I think that is a key one – and maybe emotional intelligence also helps you with psychological resilience, which is becoming increasingly important these days too.
So I think that is quite a good pick while my free choice pick is Slow Horses – what a series that is! Again, if you want to take the academic perspective, it has super workplace dynamics! So that is really interesting from the psychological perspective. But how amazing is Gary Oldman in that? And him getting into character – and it is filmed around here too so it is great to spot the filming locations. So that is my second choice.
JM: And the books too, actually – I have said that before.
CS: I have not read the books yet but I am now tempted to go and dive into Mick Heron and read the lot.
JM: They are suitably different from the TV show to make it worthwhile. I am just about to start the latest one, which only came out the other month. Those are good ‘Choice Words’ choices so thank you so much for those – and thank you very much for the wider chat. It has been great to talk to you today.
CS: Lovely to talk to you too.
JM: And thank you very much for watching. Do look out for further Choice Words videos as they are published.
