Meet the fund managers: Matching multi-asset to macroeconomic shifts
In this weekly series, investment reporter Elliot Gulliver-Needham sits down with a fund manager for a Q&A. This week, we’re hearing from Bhavin Shah, lead manager on the multi-asset BNY Mellon Future Legacy range.
How does your fund stand out from others in the same market?
Against today’s market backdrop, which is characterised by higher interest rates, higher inflation and greater levels of dispersion in returns, investors require new solutions to meet their goals.
Over the previous few decades, markets were trending upwards, the cost of capital was cheap and passive solutions were highly effective in providing attractive returns. Yet, over the past few years, the context facing investors has shifted dramatically, and this was the starting point for Future Legacy.
The fund range offers an active approach to asset allocation and security selection, with the flexibility to respond quickly to shifting market conditions. Our thematic research platform provides us with a long-range lens to view global long-term drivers of change and avoid focusing on short term volatility.
The range of inputs to the research platform, whether that’s quantitative, fundamental, ESG or bottom-up investigation, gives us a strong perspective on what’s driving long term returns. Additionally, the funds are risk-rated, allowing financial advisers to align to individual client needs and risk appetites leading up to and during retirement.
Which of your holdings are you most excited about?
The world is now more aware of the stresses that society has placed on the Earth’s natural resources, and particularly its climate. Approximately 25 per cent of global carbon emissions come from the heating and cooling of buildings, so there is demand for solutions that improve the efficiency of these systems.
When 35 to 40 per cent of a building’s electricity cost and carbon footprint comes from its heating, ventilation and cooling system, the payback period for installing these efficient systems is compelling. We are living in a more digitalised and connected world, with greening technology and electrification. This leads to an increased demand for semiconductors and makes the technology sector particularly interesting.
We also like healthcare companies that can benefit from ageing demographics and are less sensitive to wider economic pressures, such as Sanofi.
What is the biggest mistake you’ve ever made in the fund?
You always have to be aware of how much you don’t know and be prepared to change your mind if the facts change. The biggest mistake would be being scared out of a position when something hasn’t worked in our favour in the short run, but the long term tailwinds are still in place.
Investing is probabilistic and a key part of successful investing is putting the odds on your side and letting time be your friend.
What’s one change you made in the fund recently? Why didn’t you make it sooner?
We have recently been increasing government bond weightings. Long term interest rates have come off their recent highs but real yields remain positive and elevated, making them more attractive versus equities than we have seen in the past given the recent rerating in equities.