In recent years credit markets have been a difficult place to be, so starting a career in fixed income management in 2005, just before the crisis hit, means James Vokins has experienced pretty much the full gamut of the credit cycle – including a “once-in-a-100-year event” – in just nine years.
“I suppose you could say I’ve been through the cycle,” he smiles. “Certainly [I experienced] a couple of years of the credit supercycle pre-crisis where spreads were incredibly tight, and by today’s standards interest rates were reasonably high – but in hindsight we now appreciate how much of that bull market was driven by debt.
“Then it was straight into the crisis quite early on in my career. I had to get used to looking at a lot of red numbers in performance data. A lot of people, including myself, asked questions about whether it was the right industry to be in and whether there was even a future for this type of financial market.
“Credit had grown significantly over the previous decade, given the ease of funding and the growth of credit markets into weird and wonderful structured products and things like that, and riskier companies issuing debt.”
He admits there was a point in 2008 when companies the managers owned were not faring so well, and not responding to calls, with Mr Vokins describing it as “a very stressful time”, combined with poor performance.
“So you get to a point where you realise that something has to change. Luckily the financial markets moved first, but the wake of the crisis means today we are still suffering from the aftermath and that will carry on for many years.”
In spite of the tricky start to his fixed income career, however, the manager clearly enjoys his role, with Mr Vokins currently co-managing the Aviva Investors Distribution fund alongside Chris Murphy, as well as his own Aviva Investors Monthly Income Plus fund.
“I love the way the market is evolving, how high yield is growing, and around every corner you’re getting new deals and new companies to look at. One day it might be Pizza Express with a new senior secured bond deal at 7 per cent, and the next day it’s a French healthcare company with a completely different profile but offering the same yield, and so you’re having to figure out the relative value opportunities of the two.
“Things have become so much more relevant as time’s gone on,” he adds.
“The economy as a whole is such a bigger factor in our investment process. Before, people were bogged down in their component asset classes. Now, as we move towards a multi-asset, multi-strategy type institution, there is a lot more joined-up thinking, a lot more cross-investment desk conversations, that are improving our investment decisions.”
Unlike some, Mr Vokins was clear that his career lay in some form of finance-related role, with an interest in credit markets initially sparked by a three-month internship at an investment bank in the third year of his degree.
“I loved it. The hours were very long but it was an area that was interesting – debt capital markets, specialising in originating debt finance, mainly for UK corporates.
“There was a lot of marketing, pitching, hard work trying to target these companies and encouraging them to use us as the investment bank to raise money and try to launch a new deal. It was a great opener for me into how the world of corporate finance worked – why companies need debt, the specific mix between debt and equity to fund operations – and that was massively intriguing.”
A specific interest in the fixed income side of fund management was awakened once he joined the Aviva Investors graduate scheme – then Morley Fund Management – straight from university. While the scheme involved rotating through different departments, the clear goal for most of his peers was to be an equity analyst and eventually a fund manager, but Mr Vokins had other ideas.
“Me, liking to be different, said at first I wanted to do credit, to do corporate bonds rather than equity. I found it more interesting – there’s more stability, more predictability and more mathematical bias as a function of that, so I liked it more.”
He acknowledges “there was definitely a moment where I thought, ‘Should I be looking at equities’, as it is obviously the more glamorous of the two. So it crossed my mind, but not for long. I like to be different,” he laughs.
For the cricket enthusiast, it seems the decision has paid off. Joining the graduate scheme in 2005, he effectively stopped rotating and stayed in the credit team as an assistant fund manager – and within months he was assisting a senior manager on an institutional fund.
“There was definitely a natural transition from sitting in an assistant fund manager role – and being incredibly eager to get my hands on a fund of my own – to making my own decisions and having a bigger role in the team’s debate.
“As a team there is no single fund manager that’s calling the shots – it’s a collaborative effort from all the team members from the various desks coming up with the best way to generate returns.
“Ultimately it is my responsibility for the holdings, so there is a higher degree of pressure, but I didn’t feel like it was a massive step, I thought it was a very slow gradual transition,” he explains.
In terms of the Distribution fund, which celebrated its 40th anniversary in June, Mr Vokins notes the fund, while small, offers a one-stop shop for investors who are looking for income but are not fully committed to putting all their money into either equity income or bonds.
With a static allocation of approximately 60 per cent in fixed income, it is perhaps little surprise the main driver of performance recently has been from the fixed income allocation to financials, but he points out it is very much a team effort between him and Mr Murphy.
“I like managing it with someone like Chris, who has a similar style and similar view on how to manage portfolios,” he says.
“We both seem to agree on stockpicking as being the cornerstone of the process for that fund, and making sure we’re putting the very best ideas from both our teams into the fund and not buying things for the sake of it, and not being tied down to benchmarks or short-termism that can move asset prices.
“The only minor change we’ve made is in making it slightly more concentrated and focused on security selection, and we’ve improved our communication between the equity and credit desks because there are so many synergies between the two.”
Looking ahead, Mr Vokins admits that in a benign scenario where growth stays positive but low and central bank policies around the world remain accommodative with low interest rates, “it will be difficult for bonds to generate as high returns as we’ve seen in the past five years”.
He adds: “There are still areas and pockets of credit where you can make money, but they are fewer and further between.
“The driver going forward will be more on the equity side, and the fixed income will be more about preserving capital and generating a steady, stable income. So I think that static asset allocation could be one of the challenges.”
On the whole, however, the plans for the manager remain relatively straightforward, with a key goal of growing assets in the funds that he manages.
“I’d love to grow assets in the fund and in the range of funds that Aviva runs, particularly the ones that I think are genuinely great prospects and great ideas for clients.”
CV
JAMES VOKINS
2011 – present
Co-manager, Aviva Investors Distribution fund
2010 – present
Manager, Aviva Investors Monthly Income Plus fund
2005 – present
Various roles, fixed income team, Aviva Investors (formerly Morley Fund Management)
2005
Graduated with BSc (Hons) in Business Administration, Bath University
