STARTED AT JM FINN & CO
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Congratulations on being named in the PAM Top 40 under 40 – what do you think makes your approach to managing clients’ portfolios stand out?
Like all investment managers at JM Finn I believe it is important to ensure that the service all clients receive is as personal as possible. Perhaps a difference is that unlike some I get great pleasure in developing spreadsheets to assist in my day to day portfolio management. The combination of our pricing software and Excel provides the ability to access and review a wealth of data about the companies and trusts in which we invest. I also feel comfortable investing in large overseas equities which may offer a more attractive valuation than the UK listed equivalent. Many of the large FTSE 100 listed companies are truly global and I believe that when contemplating an investment you must look at them in comparison to their global peers.
You input into the WMA indices – the industry standard comparators; is your current thinking about markets on a par with your peers?
The WMA indices attempt to reflect the average positioning of firms across the industry and inevitably covers a great range of underlying asset allocations from the very bearish to the very bullish. Whatever your confidence level, there is little doubt that low, let alone negative, bond yields have created a very difficult environment in which to invest and all asset classes appear expensive. I believe it is important to have half an eye on the potential for a market setback; at present however, given the choice between a 10 year bond providing a static and low yield and a well-financed, defensive equity with a progressive dividend yield, I know where my preference lies. Equities are inevitably a more volatile ride however over the long term they have outperformed.
What do you see as the biggest long term threat to the markets?
Debt.....it stimulates growth up to a point and then stifles it. A low interest rate environment has undoubtedly promoted the misallocation of capital and we will only discover how significant this is when rates rise, or demand falls. As ever it is the timing that is the unknown. Financial strength is all important in this environment as a move to rising interest rates could quickly prompt investors to review debt levels and shun those sectors and companies that are treading a fine line.
How have you positioned your discretionary portfolios to account for this, whilst meeting your clients’ individual investment objectives?
I have tried to focus on high quality companies with strong balance sheets. For quality I look to companies that have consistently managed to grow revenues, free cash flow and dividends over a sustained period of time. When it comes to balance sheet strength, I try to consider the necessary expenditure such as interest, capital expenditure and dividends versus the underlying cash earnings. I have also gradually increased non-equity weightings through infrastructure funds, strategic bond funds and index linked gilts.