Comment: Conference had bags of goodies

Bill Jamieson. Picture: Ian Rutherford
Bill Jamieson. Picture: Ian Rutherford
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Why listen to investment managers when you could do as well with mathematical formulae and appointing an algorithm to the investment board? And what’s the point in buying shares when patient inactivity could save you a fortune?

There was no lack of challenging ideas at The Scotsman Investment Conference event – Where To from Here? – at the National Gallery in ­Edinburgh last week. And to cap it all was an engaging presentation on contrarian investing.

The need for calm, thoughtful advice is more marked than ever after another tumultuous and unnerving week in markets. Growing concern over a return to recession in the eurozone, interest rate uncertainty, China banking fears and the Ebola scare combined to trigger another bout of risk aversion. In America, share prices hit their lowest level for two months. In the UK, the FTSE 100 dived 2.9 per cent in its worst week for 16 months to hit its lowest level for a year. In ­Europe, stock markets fell by 4 per cent on data showing that the mighty German economy is slowing down.

Of particular concern was the continued fall in commodity prices and oil in particular, which featured so prominently in the independence referendum campaign. The price of Brent crude is down almost 24 per cent since midsummer and at its lowest since late 2010. The latest fall took the price down to $89.78 a barrel.

With fears over global growth crowding in, the conference had no lack of big issues to chew on. John Wyn-Evans, head of investment strategy at Investec, set the pace with a multi-headed question: are we borrowing from tomorrow’s consumption, profits and investment to sustain current economic activity and living standards?

His analysis of personal and government debt and borrowing left no room for comfort, with average debt-to-GDP ratios in the developed world now approaching 100 per cent. Profits and dividends, he argued, were unlikely to take a nose-dive, but after the strong upward surge of recent years we are likely to see a much more modest performance.

James Clunie, manager of Jupiter Asset Management’s Absolute Return Fund, set out how such funds use short selling as a means of enhancing returns – not, he stressed, an activity we should try in our own homes. He set out well the virtues of patience and the discipline of accepting losses quickly. Waiting on the sidelines is not at all the same thing as inactivity. If a market correction is under way, investors would do well to sit it out and not to rush in during the early stages.

Alex Wright, portfolio manager of Fidelity Special Values, set out the merits of contrarian investing, drawing on Fidelity’s Special Situations Trust, which has been one of the outstanding successes in UK investment management. Wright looked at some of the currently unfashionable sectors, including secondary property. This has seen very little of a recovery until recently. It was in such sectors, he argued, that opportunities exist for contrarian investment.

Shares in the retail sector have been having a torrid time. But he singled out the convenience store chain McColl’s as an exception. The group has shown an ability to grow strongly in a fragmented and unconsolidated sector. Other companies singled out for mention include DX Group, a UK mail and parcels operator, and Dalata, the largest hotel operator in Ireland.

However, Wright is still avoiding the retail food sector, including Tesco, whose shares have fallen by more than 40 per cent this year.

Finally, Bruce Jenkyn-Jones, managing director of listed equities at Impax Asset Management, gave a tantalising snapshot of Impax’s distinctive investment approach. Impax specialises in opportunities created by the scarcity of natural resources and the growing demand for cleaner, more efficient products and services. It seeks out companies set to benefit from the long-term trends of changing demographics, urbanisation, rising consumption, and the resultant increases in resource scarcity. Investment is focused on alternative energy, energy efficiency, water, waste, food and agriculture related markets.

His fluent, quick-fire summary clearly engaged the audience – a visit to the website detailing this distinctly different investment approach is well worth it (www.impaxam.com).

My thanks to the sponsors, the speakers, the audience for sharp questions, The Scotsman Conference organisers, to Owen Kelly of Scottish Financial Enterprise for a masterly overview and not least to the National Gallery for a splendid venue and to the caterers for a carnival of canapés.