He started his career at Shell and at the start of this year took on the role of head of resources at Baring Asset Management.
Mr Goodwin begins: “I read economics at university and was pretty clear that I wanted to go into a business-related qualification post graduate. I was less keen to go into straight accountancy, I wanted to learn a skill while working in an actual industry.”
It was the oil industry that was to be his calling. “The more I looked into the oil industry, it looked a really interesting place,” he admits. “Every geopolitical dynamic seems to be influenced by energy and resources, so it was a natural progression into that industry.
“I had a great time at Shell. I was there for a number of years, and I got my accountancy qualifications and really understood how companies operate. We’re in such a luxurious position in asset management that we’re seeing chief financial officers and chief executives all the time. You forget the background that is driving all the decisions they are making from an industry perspective and how difficult it is to run companies. I’ve seen that from a company perspective so that was really interesting.”
But after five years at Shell, Mr Goodwin decided to pursue his interest in the markets. It’s an area he had acquired a taste for while serving an internship at Lehman Brothers during his education, with the research side appealing the most to him. When an opportunity arose at Lehman’s, he left Shell and moved across.
He continues: “I was just understanding a bit more about whether it [equity research] suited me and it was a reasonably quick transition from Shell into the sell side.
“I got my education on the sell side in terms of how markets interpret what the companies are saying and interpret earnings drivers on a wider basis. I then stayed within the energy sector, looking at oil service companies, exploration and production companies, but it was there I came to understand very clearly how markets operate.” Roles on the equity research side at Citigroup and Merrill Lynch followed. It was the changing nature of his role that finally prompted Mr Goodwin to move across to the buy side, though.
He reveals: “I was increasingly being asked by clients on the buy side to go in and speak to management and to look at companies that I didn’t formally cover. It was almost like a due-diligence process.
“There are very different drivers on the sell side. You’re looking to generate turnover; you’re looking to engender flows in companies. As I saw this push to go more and more into analysing companies that I wasn’t formally covering, I thought it was a natural progression to go across to the buy side and actually be paid to investigate and then buy the right companies.”
But he emphasises the whole process of shifting from selling to buying took place across 18 months and, as he puts it, he had “very strict criteria”.
Mr Goodwin says: “I wanted to work in a company where it was small enough that performance mattered, so what I did actually affected the bottom line – that was quite key.
“Having worked at Shell and Citigroup and Merrill Lynch, which are very big corporate organisations, it was nice to move to a smaller organisation where your impact is much more direct. But at the same time I think, and have thought from day one, that there are some principles to investing successfully in resources.”
He believes that the investment process in resources needs to be a bottom-up, stock-specific approach, rather than the macro approach that many might associate with resources investing.
“I wanted to work in a company where research and investment in understanding companies was very important, rather than being a solely top-down, macro-based approach,” he suggests. “The other aspect to resources is that you need to look at resources on a global basis. I needed to have access to people who were looking at Chinese companies, Asian companies, as well as European and North American companies – it had to be a global remit.
“Finally, I wanted to work in a firm where portfolios were very concentrated. The move across to Martin Currie ticked all of those boxes.”
Mr Goodwin wanted to go into his new role as a portfolio manager with direct responsibility for running investment portfolios. In the end, he believes it was a relatively smooth transition. And those same core principles were behind his decision to take his current role at Barings, too.
He reiterates: “It was a very proactive decision to come to Barings, based around the fact there is big investment here in research and there is a very structured way of looking at a company.
“Clearly, Barings is a global house. On the equities side the core principles are running high-conviction, concentrated portfolios, which again fitted with the way that I like to approach investing in resources.”
He cites the “strong research franchise” that Barings claims within its resources team, as demonstrated by the fact it has combined expertise in soft commodities, mined commodities, agricultural equities, mining equities and energy equities. “The research side within our team meant that we could focus on proper bottom-up research of the companies that we invest in. Also, plugging into the Barings research infrastructure in emerging markets in Asia was really important to me,” he adds.
Taking on his current position at Barings, Mr Goodwin had a clear objective. He elaborates: “I would like to have [the] Barings global resources franchise being recognised as a leading global investor in resources equities. I think in order to do that, the vision is to have any client with any desire to be investing in resources come to Barings with an understanding as to what the core principles are and what we do.
“The core principles that I’ve run since I’ve been running money, and a lot of it was instilled in Barings, is a high degree of due diligence around researching companies – portfolios that are focused on stock risk versus macro risk. [In other words], high-conviction, concentrated portfolios, where every one of the 40 to 50 stocks that we’re investing in has been researched well.
“The other core principle is solid portfolio construction, where with these high-conviction, concentrated portfolios, the majority of the risk sits at the stock level rather than at the macro level.”
Is it a challenge to convince investors of this approach to resources investing, where the emphasis is on stock specifics above macroeconomic factors?
“I think the nature of investing in resources has moved on from being about the macro to investing in companies,” he says.
“Resources equities have not been fantastic from a performance perspective generally. I think a lot of people’s experience of investing in resources has been tough in the past four to five years based around these gyrations. What that has meant is valuations now look very interesting for agriculture, for mining and for resources.”
The current environment for investing in resources certainly presents continuing challenges for investors but Mr Goodwin believes there are opportunities and that Barings has the reputation to continue to attract investment.
“We are resources people and we understand cycles, we understand capital allocation, and we understand China growth, all of these drivers.”
It’s a simple concept, he insists: “It’s very simple, ultimately, what we are trying to achieve. We are trying to invest in companies for the long term where they are generating more cash than the market appreciates.”
CV
Duncan Goodwin
2014 – present
Head of global resources, Barings Asset Management
2005 – 2013
Portfolio manager, global resources, Martin Currie
2002 – 2005
Director, equity research, Merrill Lynch
2000 – 2002
Vice president, equity research, Citigroup
1998 – 2000
Analyst, Lehman Brothers
1994 – 1998
Business planning, Shell
