Henderson’s de Bunsen on why investors were wrong in 2016

Henderson’s de Bunsen on why investors were wrong in 2016

Henderson’s James de Bunsen said he suspects most investors were wrongly positioned for what transpired in markets during 2016.

The fund manager at Henderson Global Investors said the extraordinary political events which marked 2016 are a “salutary reminder” of how tricky and frustrating investing can be.

For example, Mr de Bunsen, who is lead manager of the £154m Henderson Multi-Manager Absolute Return fund, said an entirely unhedged international portfolio could have given sterling investors a “get-out-of-jail-free card” from the plunging pound.

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“This would have dug you out of any nasty hole you might have blundered into,” he said. 

“We got that foreign exchange decision about half right, which seems okay given we assessed the referendum as being a 50/50 bet.” 

While the Brexit vote and Trump’s victory were unexpected and were catalysts for largely unexpected market movements, Mr de Bunsen said 2016 was “tricky from the word go”.

For example, he said sell-side strategists from Goldman Sachs abandoned five of their six top trades by mid-February.

“The highest conviction trades, formulated by some of the sharpest minds on Wall Street, were so spectacularly wrong that they were forced to take their theoretical losses on all but one of them within six weeks of the New Year.” 

He said the primary causes of this “noteworthy wrongness” were concerns about growth, deflation, and rising defaults in the energy sector. 

“They proved relatively short-lived, with markets bouncing fairly sharply and trending higher for the rest of the year, with the exception of one short-lived spasm of anxiety around Brexit.” 

But Mr de Bunsen said: "A quick glance at a broad global equity index price chart tells you very little about the violent ructions that have punctuated 2016 within markets.” 

He added: “No matter what your investing stripe, you’ve probably had some pretty dark days in 2016.”