Volatility plays to active manager strengths

Glenn Freeman  |   -- Text size  Decrease  Increase   |  

Glenn Freeman: Now, Libby, just firstly, has there always been this much interplay between politics and financial markets or is it something that's more – is it just that we're seeing more in the headlines and it's more front of mind now or what are your thoughts on that?

Libby Cantrill: Yeah, I mean, I think the U.S. politics has always mattered to financial markets to a certain extent. But I would argue that after the financial crisis, after we saw really unprecedented regulations, so more involvement in the US government in companies, in markets and we saw more fiscal expansion, that arguably politics actually had more of an impact on financial markets.

I think an example of that was the debt ceiling crisis in the United States in August of 2011. I think that was sort of proof positive to investors that, yes, they actually hadn't paid attention to what was going on in Washington because it could move markets.

Freeman: And given there is changeability in the political scene how difficult does that make that for companies like PIMCO and for investors to make sort of medium-term and long-term calls?

Cantrill: Yeah, I mean, I think that's a great question. And certainly, this environment is more difficult; there is more uncertainty. But we would argue from an active management perspective it actually creates a lot of opportunity. And our investment process really sort of feeds into this type of market in that we get together on a quarterly basis to talk about what's going on in the next three to nine months. And then once a year, we all come together and talk about what's happening over the three to five years. So, we have a lot of opportunities for us to test both our medium-term and long-term thesis. And then of course, in between those our investment committee is meeting on a regular basis. So, we would say that, yes, a lot of uncertainty, yes, a lot of volatility, but it's sort of the sweet spot, we would argue for a manger like PIMCO.

Freeman: And so, again, for retail investors what do you as perhaps the greatest risk facing them, just on a macro level over the next 12 months?

Cantrill: Well, from a political perspective, which is of course what I cover, there are lots of different political risks, whether it's geopolitical risks with increasing tensions with North Korea, whether it's potentially more increased protectionism from the administration or whether it's something as extreme as draconian as impeachment, which is not certainly what our base case is, but is definitely a possibility with any administration.

What we think is more likely, however, to play out is that President Trump will just see that there are more obstacles to getting his agenda through Congress. So, our base case is that less actually happens, but that some of these draconian risks actually don't come to fruition either.

Video Archive...

Elevators, FMCG among 4 top stocks
14/03/2018  These global companies possess the right attributes for long-term investors, according to BMO Pyrford's CEO and chief investment officer, Tony Cousins.
Aussies tough on corporates but yields enviable
12/03/2018  How this fund manager identifies quality companies in emerging markets, and why it views Australia's investment climate more favourably than other markets.
Morningstar Fund Manager of the Year Award 2018
08/03/2018  Morningstar's Kunal Kotwal explains how we choose our Fund Manager of the Year.
Fundamentals strong for Australian credit
01/03/2018  In this edition of How We Invest Your Money, Western Asset Management's Anthony Kirkham shares his outlook for Australian credit markets.
Opportunities and risks in global credit markets
27/02/2018  In this edition of How We Invest Your Money, John Beck of Franklin Templeton shares his thoughts on the outlook for global credit markets.
FOMO dominant investor sentiment
16/02/2018  Investors are aggressively positioned, with fear-of-missing-out now the overwhelming sentiment , says Morningstar Investment Management's Daniel Needham.
3 top themes in Asian markets
14/02/2018  Diverse themes within financial services and renewables are among the top picks for 2018 from Nikko Asset Management's Eng-Teck Tan.
Accessing world's second-largest stock market
13/02/2018  Given China's ongoing economic growth and increasing representation in global indices, we ask Nikko AM's Eng-Teck Tan what this means for Australian investors.
3 companies tipped for growth
08/02/2018  These very distinct companies across gaming, healthcare and construction are among T. Rowe Price's top Australian equity picks.
Commodities strength augurs well for Aussie shares
06/02/2018  Synchronised global growth and strong commodities form a positive backdrop for Australian equities in 2018, says Randal Jenneke of T. Rowe Price.
Will India live up to Modi's hype?
31/01/2018  The International Monetary Fund has predicted India will drive global growth in 2018, and Prime Minister Modi has made bold promises. What does it mean for investors?
3 macro themes for 2018
31/01/2018  US corporate tax cuts and slow-burning European economic growth feed BlackRock iShares' bullishness on this third market--and equities in general, explains Alex Zaika.
2 top stocks liked by IML
23/01/2018  Investors Mutual senior equities analyst and portfolio manager, Daniel Moore, names some of his team’s favoured healthcare stocks.
Identifying under-appreciated companies an inexact science
18/01/2018  How this fund manager measures the value and quality of its underlying assets--and it isn't all about PE ratios, says Daniel Moore, portfolio manager, Investors Mutual.
Ask The Expert: The what, how and when of multi-asset
18/01/2018  Multi-asset strategies may make more sense than ever amid ongoing volatility, and these are some of the preferred areas for Morningstar Investment Management's senior portfolio manager, Brad Bugg.
3 Sustainable Investing Trends for 2018
11/01/2018  Jon Hale says climate risk, asset manager engagement, and growing advisor interest will be key issues in the coming year.
Fidelity: Inflation is biggest threat to returns in 2018
06/12/2017  Fidelity's UK-based head of equities Sonja Laud explains what has driven positive returns over the past 12 months and looks ahead to where investors can make gains in 2018.
Bogle remains unimpressed with strategic beta
30/10/2017  The Vanguard founder says his long-time strategy of sticking to index funds is still the best bet.
Jack Bogle on what's next for active investing
30/10/2017  The Vanguard founder says net withdrawals have been offset by rising stock prices.
Bogle: Vanguard's size a worry
30/10/2017  Diminishing economies of scale and potential regulatory concerns limits how much bigger Vanguard should become, says founder Jack Bogle.
Bogle: Index funds the best hope for corporate governance
25/10/2017  Corporate governance should be based on long-term factors affecting the corporation, and traditional index funds are the only true, long-term investors, says Vanguard founder Jack Bogle.
Bogle: The good and the bad of ETF trading
25/10/2017  Any significant amount of trading will decrease your return relative to the market, says the Vanguard founder.
Bogle: ETF flows muddle valuation, risk picture
25/10/2017  Large swings in ETF flows make it hard to forecast valuations and are likely introducing new risks into the market, says Vanguard founder Jack Bogle.
Bogle's 'reasonable expectations' for market returns
24/10/2017  The Vanguard founder sees 4 per cent returns for stocks and 3 per cent for bonds over the next decade. 
2 quality stock picks from Anton Tagliaferro
23/10/2017  Investors Mutual's Anton Tagliaferro looks at a couple of quality companies which he believes boast strong competitive advantages.
4 things to consider before selecting a LIC
19/10/2017  Listed Investment Companies are undergoing a resurgence for investors, and Geoff Wilson, CEO, Wilson Asset Management outlines why and what you should look out for.
Investing lessons from Hamish Douglass
10/10/2017  What individual investors can learn from Magellan's approach to stock selection, including considering first- and second-order beneficiaries of disruption and balancing risk against valuation.
Deeper demand driving these pooled investments
31/08/2017  Listed investment trusts are beginning to take off in Australia, but exactly what are they and how do they differ from listed investment companies and managed funds?
Earnings season FY17 mixed bag so far
18/08/2017  Aside from a few high-profile earnings guidance misses, large-cap stocks are doing okay as FY17 reporting season passes halfway, says AMP chief economist Shane Oliver.
Kerr Neilson on why global investment exposure is key
07/08/2017  There are two types of investors, regardless of market noise, imputation credits, diversification approaches and market indices, says the managing director of Platinum Asset Management.
Finding fixed income opportunities in new paradigm
02/08/2017  Slowing economic growth in the US and parts of Europe emphasises the need to carefully select credit opportunities, says Vincent Reinhart, chief economist, Standish Mellon Asset Management.
The home-truths of investing
12/07/2017  Look for companies that sit outside the cycle; heed the lessons of history; and remember the power of compounding, says Bennelong's Neale Goldston-Morris.
Investing to protect on the downside
30/06/2017  There are investment strategies you can adopt to mitigate volatility-linked fear and uncertainty in markets, explains Roy Maslen, chief investment officer – Australian equities, AllianceBernstein.
Don’t overdo benchmark consideration
28/06/2017  Being benchmark agnostic is the most effective approach to fixed income investing, according to Anujeet Sareen, portfolio manager, Brandywine Global.
Factor-based investing using ETFs
26/06/2017  Investors should consider style-exposures--such as value, defensive or yield-- they would like in their portfolios, explains Jonathan Shead, head of portfolio strategists – Asia Pacific, State Street Global Advisors.
Volatility plays to active manager strengths
22/06/2017  The climate of political volatility in the US holds important implications for investors and the funds they invest in, particularly around Donald Trump's ability to pass legislation through Congress, says PIMCO's Libby Cantrill.
3 pockets of opportunity in fixed income
07/06/2017  The head of PIMCO Australia gives his views on active management in fixed income and tells us where he sees most value in this space.
PIMCO Income Fund
07/06/2017  Morningstar's Tim Wong looks at the strengths and competitive advantages of this Silver-rated strategy.
PIMCO Global Credit Fund
07/06/2017  The PIMCO Global Credit strategy receives a Morningstar Analyst Rating of Silver due to its sizeable and highly capable credit research team.
Trump administration biggest macro threat for investors
05/06/2017  Even as European political volatility subsides, the US Government remains a considerable threat to financial markets, says Colleen Barbeau, director of equity portfolio management, Franklin Templeton.
Investors Mutual WS Future Leaders Fund
01/06/2017  Investors Mutual Future Leaders is a capable strategy focused on investing in Australian companies outside the top 50.
Antipodes Global Fund: Class P
01/06/2017  Antipodes constructs this portfolio based on three major objectives--capital preservation, inclusion of attractively priced businesses, and investment resilience.
Why PIMCO Australian Bond is a Gold-rated strategy
10/05/2017  Tim Wong explains why PIMCO Australian Bond is Morningstar's most highly rated fixed-interest strategy in this market.
Schroders stays hot on commodities, cooler on tech and defensives
01/05/2017  Long-term investors in Australian shares will continue to find value, but the time for risk-taking on more speculative plays has passed, says Martin Conlon, Schroders’ head of Australian equities.
No free lunch as fixed-income market shifts
07/04/2017  More difficult market conditions in a rising interest rate environment highlight the value of active management across your portfolio, says Simon Doyle, Schroders' head of fixed income and multi-asset.
The growing appeal of LICs
06/03/2017  The popularity of listed investment companies is on the rise once again, but there are several things investors need to be aware of before buying in, explains Michael Malseed, Morningstar senior analyst, manager research.