Data alone won't always make the numbers add up.

Data alone won't always make the numbers add up.

At Clear CM we believe that investment research is akin to buying a home. Most people would not buy a house without first visiting the property. While there, they might even test the bathroom taps or lift up carpets looking for tell-tale signs of damp, and they will possibly quiz the current owner in an effort to discover what the neighbours are really like.

Our portfolios are constructed on a top down basis, meaning we greatly value asset allocation. But while asset allocation accounts for perhaps 90% of a portfolio’s performance, the selection of the actual underlying investment instruments (the funds) is also key.

This is why quantitative research (analysing the numbers on spreadsheets) is only part of the story. At Clear CM we also take qualitative research very seriously.

This essentially means that we like to visit the fund or investment manager and look them squarely in the eyes.

We want to understand their systems, their process, what they think, how they manage the investment and what might make them consider changing what they do. With such a volatile global political and economic climate, new circumstances are facing us every day, so we need to know how the fund manager is likely to react - and how that reaction may affect other investment instruments within the mix of our respective portfolios.

Over the last month we’ve spent time with Legal & General Investment Management (LGIM), J O Hambro and Schroders, amongst others. We’ve discussed many topics with them, including their take on the UK’s 2.9% inflation rate, Angela Merkel’s election victory, Donald Trump’s foreign policy and whether he will be able to deliver his fiscal policy and tax reforms… the list goes on!

All very interesting. But it’s just as useful to learn a few personal details about our contacts. The fund manager we use at the Schroder Tokyo fund, for example, is married to a Japanese lady and has lived in Japan for over five years. Where we don’t have the local knowledge, it’s very comforting to know our fund manager does.

It is true that analysing spreadsheets and other data guides much of our decision making. But, just like we wouldn’t usually buy a home using only a computer, there is still nothing better in investment research than looking into the whites of a fund manager’s eyes and trying to work out what moves him or her!

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Category: Uncategorized

Author: Martin Vaughan

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