Market Views from GAM and Working with The deVere Group
Here, I speak with the senior GAM Investment team and learn more about their relationship with the deVere Group globally and their views on the markets.
How does GAM work with deVere to provide their advisors and clients the very best levels of support?
Like deVere GAM is a global business with offices in London, New York, Tokyo, Dublin, Bermuda, Zurich, Lugano, Hong Kong and Los Angeles. So support is always on hand regardless of time zone. Either directly or via our dedicated deVere support email address.
DeVere has access to the vast range of materials and research that we produce on a weekly, monthly and quarterly basis. In addition to regular access to the research and asset allocation teams that GAM have at its disposal.
GAM also travel globally to the deVere offices, giving fund specific presentations and economic updates to ensure that the advisors are kept up to date with GAMs latest asset allocation and managers selection views. This year we have visited deVere offices in Johannesburg, Durban, Cape Town, Kuwait, Qatar, Abu Dhabi, Dubai, Japan, Hong Kong, Vietnam, Thailand and Malaysia with an up and coming trip in June covering Zurich, Geneva and Basel. We have also hosted various client seminars and deVere advisor social events.
Lastly we have dedicated GAM/deVere micro site gam.com. This provides full fund information; including manager videos, fact sheets, performance, prices and the different avenues to accessing the funds. GAM also hosts a monthly webcast for all deVere advisors to dial into. These range from educational pieces on asset allocation; multi asset class investing, managing portfolios to risk to performance updates and manager spotlights.
What are the indicators of q1 and q2 for the global markets for the rest of 2013 and beyond?
The US is experiencing a sustained pick-up in economic growth to a modest level. The US is much more advanced in its balance sheet deleveraging than peripheral Europe. The US benefits from a much stronger banking system, with higher levels of profitability, capital ratios and funding, able to support the country’s economic expansion. In addition to this American economy has been revolutionized by the emergence of shale gas making US energy independence a genuine possibility.
Economic growth remains highly divergent, with non-OECD economies accounting for a growing share of global GDP formation. Although some emerging market economies, such as China and Brazil, are experiencing a lower rate of growth than in the past, their larger relative size means that they are increasingly responsible for global growth remaining on trend.
Europe on a macroeconomic level is mixed to slightly positive. We are not seeing any evidence of a real recovery in the Southern European economies in the official PMI figures. However, many of the negative factors are incrementally being removed; fiscal accounts are moving close towards primary surplus, current accounts are being balanced which suggests that much of the ‘heavy lifting’ has finally been done. There are still many structural reforms that need to be carried out and France is one example where we need to see some movement in this regard. And there also appears to be an easing of the strong austerity rhetoric that was used in the past in part to talk up confidence. So we take all of this as mildly positive.
To summarize global economic growth remains approximately on trend at around 3% per annum – positive, but weak. The challenges of Europe are no longer seen as a terminal illness but more a chronic condition that investors will learn to live with and as a consequence refocus their energy on the opportunity set available. (e.g. Fundamentals now matter.) The current macro environment offers rich pickings for our strategy, in currencies, the commodities complex and exploiting the bond curve, that is so skewed as a result of all the government intervention
How has, in general terms, the global economic experience of the last five years effected long-term investments strategies? And how will this play out moving forward?
The last five years has seen asset classes returns skewed as a result of government intervention, whether that’s bond markets at record highs or equities moving sharply in either direction.
Markets have now moved from a predominately headline driven risk on/risk off environment with asset classes moving as a whole with minimal differentiation, to a more fundamentally driven environment.
On a forward looking basis we are no longer in a “rising tide raises all boats” environment. Benchmark hugging mangers that fit conveniently in a box of equities, bond, value, growth etc. are going to find it hard to deliver alpha. This is an environment where compelling opportunities will be rewarded, whether that’s companies or countries that can grow in a low growth environment, asset classes still offering attractive yields… currencies… or simply taking advantage of volatility or the lack of!
An environment with large dispersions of returns that will reward those managers that are prepared to run high tracking error, conviction based portfolios.
Pessimists no longer control market prices, but certainly neither have carefree optimists taken over!
We are convinced that the skills and values that distinguish GAM will continue to matter in the years to come. To quote David Swensen of Yale University Endowment Office……. “Active management strategies demand uninstitutional behavior from institutions, creating a paradox that few can unravel!”
This is the exact environment that benefits GAMs style approach to investment.
How will global markets be affected when central banks rein in their money easy policies? And when do you think this might happen in earnest?
Clearly the government intervention has been unprecedented and to claim we can give a detailed, accurate outcome to the end of these policies would be unrealistic. What I do feel confident in saying is that it would require a huge amount of luck to exit these policies without some unintended consequences, whether that be inflation, the next equity market bubble or currency wars.
However, where there is volatility and dislocation there is opportunity and in a diversified portfolio we are convinced that we can continue to deliver low volatility consistent returns.