Multi-assetOct 12 2015

‘You’ve got to understand how returns are generated’

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Mr Greetham had seemed inextricably linked to the company and was a familiar face to investors and the media alike.

Shortly after his departure in January he turned up at Royal London Asset Management (RLAM), where he has been overseeing the development of a range of multi-asset products for UK retail investors, the launch of which is imminent.

When asked what prompted this move to RLAM, Mr Greetham does not deny it was a “big decision”.

He elaborates: “It was a feeling that in the early stages of being at Fidelity I was setting up something new. They didn’t have multi-asset funds and I set up multi-asset funds and developed the tactical asset allocation process for them. As time went on, I found myself being asked to manage some of the funds I’d set up. And I was getting less involved in the early stage of business development, like strategy and product design, which I find really interesting.”

He continues: “Royal London happened to come along and for me it was a fantastic opportunity because Royal London has an unbelievably good position in the pensions market in the UK. So they’re very well placed for the new pensions freedoms and I felt that my experience of multi-asset funds outside of the pensions wrapper and Royal London’s very strong performance in pensions could work very well together, so we could complement each other.”

By his own account, he is now responsible for a “substantial sum of money” in terms of tactical asset allocation.

“I’m not hung up on amounts but I’m managing tactical asset allocation for about £50bn [in relation to Royal London pension assets]... so it’s a big responsibility,” he acknowledges. “But it’s really exciting setting something up, having a process I can bring here and develop properly and there’s an entrepreneurial side to it that really appeals to me – getting something built, seeing it develop, understanding you’re trying to do the best for your clients in all the ways that you can, rather than just in a narrow way.”

With RLAM’s range of multi-asset funds yet to come to market, it is a rather late entrant to the burgeoning space. So what can investors expect, given that the funds have been designed in light of the pension reforms?

Says Mr Greetham: “I’ve always believed in simplicity, so a very clearly designed range of funds with very clear investment objectives, aligned with what people are trying to do, that ordinary people actually want, whether it’s within a pensions wrapper or outside a pensions wrapper.”

He believes the changes to pensions rolled out by the government have “blurred [the] lines”.

“So we want something very clearly defined… something that fits in with the idea that people will be moving money in and out of the pensions wrapper and into Isas,” he explains.

To communicate to advisers how RLAM’s funds are positioned and why, Mr Greetham has created a website, InvestmentClock.co.uk. It’s a model he used while at Fidelity and “is a way of relating what’s happening in markets to what’s happening in the world economic cycle”.

He notes: “It’s a very ancient concept, that at different stages of the business cycle different things do well. I can find references from the 1930s. There’s an article in the London Evening Standard which asks whether it was the right stage of the investment clock to buy a house in London, so some things just don’t ever change and that’s the essence of what we do.”

Mr Greetham remarks: “I‘ve been very fortunate that I’ve had quite a following amongst advisers and I’m hoping to carry on doing a good job for them. I’m not trying to do anything radically brand new – just trying to do straightforward things in line with well-tested investment principles and do them well.”

So what is the investment clock telling him about where to be positioned at the moment?

“What’s interesting at the moment is the growth picture is quite positive – it’s not terribly exciting, it’s sort of steady rather than dramatically positive and it depends which parts of the world you’re looking at,” he concedes. “So China is slowing down but it looks like Europe, for example, is still picking up.”

Mr Greetham refers to the slowdown in China’s economic growth as “the big story of our investment generation”.

“That combination of US interest rates starting to go higher and China slowing down and commodity prices falling is actually very negative for emerging markets but very positive for Japan. So the biggest position we’ve got on all our funds in terms of regional equity markets is long Japan, short emerging markets,” he says.

Part of the reason the investment clock website is operating ahead of the launch of the multi-asset range of funds is because he is keen for investors and advisers to understand the process and believe in it before they buy into the products.

“I think you’ve got to understand how returns are being generated as an investor,” he asserts. “And I think in the modern internet age there’s instant information everywhere.

“People want to know where you’re positioned now, what you think about what happened yesterday and what you’re going to do about it. And you’re looking after their money and you’ve got to take that seriously.

“I don’t think it’s enough anymore to say, ‘Well we’re going to do clever things and in a year’s time we’ll see how it looks’.”

He suggests there are not many funds which acknowledge this development and he hopes RLAM stands apart as a result.

“I’m a very strong believer in the power of tactical asset allocation to add to returns over the long run and shape a fund for the prevailing market conditions,” Mr Greetham says. “But for that to work you have to stick with the programme, and if you don’t explain what you’re doing, if you have a bad year, people will just go somewhere else.

“I believe in what I’m doing and I want people to stay with me. I think it’s good for them and good for me.”

In spite of his fervent belief in the investment-clock model, Mr Greetham admits there are times when he has acted on other convictions, citing his decision to move client money out of equities in November 2007 before the financial crisis hit.

“My investment-clock model wasn’t that negative at the time. The economies hadn’t collapsed, they were slowing a little bit but they hadn’t collapsed, stockmarkets had bounced back tremendously from the summer of 2007 when there were rate cuts,” he explains. But then he recalls the banks were “suddenly, out of nowhere… turning all the taps off”.

He describes: “My models were reasonably positive, they were still saying long equities. It felt like one of those moments where Wile E Coyote had run over the cliff and hadn’t fallen yet. And I just thought, this is going to go really badly wrong.

“We went underweight equities and within three or four months the models said, we agree with you – but we got out early and we got back in early as well, actually.”

Mr Greetham suggests: “Those moments when you have a framework, you understand the framework but you’re still willing to stick your neck out, it feels really good when it pays off. If you make an investment decision that seems obvious and easy it’s probably wrong.

“The big investment decisions you normally get right are the ones you actually feel pretty uncomfortable about at the time, but your head tells you it’s the right thing to do.”

CV

TREVOR GREETHAM

2015 – present

Head of multi-asset, Royal London Asset Management

2005 – 2015

Asset allocation director, Fidelity Worldwide Investment

1995 – 2005

Director of asset allocation, Merrill Lynch