By Alastair Laing, Capital Gearing Trust
Monday is dominated by a board meeting of Capital Gearing Trust. Over the last decade board meeting agendas have lengthened considerably. The original business of board meetings, including reviewing the accounts and the investment performance of the company, takes up less than half the meeting. Other agenda items necessarily include a review of our AIFMD implementation arrangements and considering the impact and timetable of mandated compulsory auditor rotation. A lot of coffee is drunk.
We wait for the phone to ring.
Perhaps we are the laziest portfolio managers in the City? I have frequently been told about the importance of wearing out shoe leather by managers who meet hundreds of companies every year. Perhaps, however we consider our job is to define very tightly the small number of opportunities we are well placed to understand and not to be distracted by those we cannot hope to analyse effectively. Know the assets you want to own and know the price you want to pay for them. Then wait for the phone to ring.
With discipline comes focus, with patience comes opportunity. That is not actually our mantra but perhaps it should be.
Oh my Lord, they haven’t actually done it...yes they have…they have elected Donald Trump.
Into the office early as Asian markets are in free fall and US market futures are limit down. Is this the day the fantastic equity opportunities will be offered up on a plate? Expectation slowly gives way to disappointment. The phone does ring and we negotiate on a number of positions but volumes are low. In an equity market that has become conditioned to “buy the dips” value opportunities are hard won. At least there has been some weakness in the US dollar and US government bond markets. We invest a little in defensive assets in the afternoon as equity markets rally strongly.
More patience required. What was that mantra again?
Healthcare companies have rallied strongly post-election on the expectation that Trump will be more lenient on pharmaceutical company price gouging than Clinton would have been. Not only have underlying phama stocks performed well but discounts have narrowed on healthcare investment trusts owned by the fund. The phone rings, time to sell.
I spend the rest of my morning writing the first draft of a fund manager diary for this newsletter.
It is our monthly asset allocation meeting, attended by myself, Peter Spiller and Christopher Clothier. I love these meetings. The structure is predictable but the discussions never are. Part capital markets analysis, part economics tutorial, part history lesson. We spend some time exploring the thesis recently put forward by federal reserve staff economists that long term structural real interest rates have fallen to 1%. Not everyone’s cup of tea but the answer has profound implications; not just for asset prices and asset allocation but also the political economy for decades to come. There are a range of views, however consensus that the implications for risk asset pricing are poor. Either long term rates will rise which will impact the rating of all asset prices, or they will not in which case corporate profits are in real trouble.
We get back to the desk. The phone rings…
Alastair Laing, Capital Gearing Trust