Firing line 

‘Some slowdown is expected, but the severity of it we can handle’

‘Some slowdown is expected, but the severity of it we can handle’

Efficiency has become a constant theme of the industry as it grapples with cost pressures, margin pressures and a tougher investment environment, says Kames Capital’s Stephen Jones.

Recent changes at Kames Capital have been a direct response to the increasing need for the investment management businesses to improve efficiency towards the end of what has been avery long expansion cycle, explains its chief investment officer.

Mr Jones says: “Nevertheless, we do not believe we are in a recession-type hard stop on economic activity, not least because key areas of global monetary policy have been changed.

“While there were definitely heightened concerns towards the end of last year, with a slowdown in China and Europe, those changes have been met with a change in policy from central banks.”

He continues: “We think that will stabilise things and growth will continue this year and into the next, in a low but positive way.”

Business shake-up

In 2018, Kames Capital was forced to reshuffle its bond funds team for the second time in just over a year after a number of exits, including the departure of Stephen Snowden, co-head of fixed income, David Ennett, head of high yield, and fund managers Stephen Baines and Juan Valenzuela.

The departure of Mr Snowden and his colleagues came a year after the resignation of David Roberts and Phil Milburn, the previous co-heads of fixed income, but the business also restructured its sales team ahead of Brexit, with Mark Savage promoted to head of UK distribution.

Indeed, Mr Jones says the beginning of 2018 marked a big change for the company, as it started managing the European asset management businesses of Aegon as one central European unit.

He notes many of its recent changes have been about efficiency and “making the best and most streamlined and scalable use of operations, cross-fertilising products from investment companies into the distributions teams, and maintaining centres of activity and active management from Edinburgh, London and The Hague”.

He continues: “The focus is to continue to run money in fixed income, property, multi-asset and alternative assets, but at the same time to not be... across everything.

“The asset class description that I use is not ‘everything, everywhere’, but indicates expertise in assets that we can hone down and make relevant to clients who want a certain style and outcome, whether that is growth or income generated.”

Market outlook

While a growth scenario is unlikely, a carry scenario – where positive returns are gained from holding assets – will allow for some positive investments this year, says Mr Jones.

“We do not see that really coming to an abrupt halt next year either,” he says.

Nevertheless, he notes the defined economic expansion, seen in 2016, 2017 and in early 2018, is behind us.

“There is no exuberance or complacency around here,” he says.

“Everybody is worried and investors have quite a large amount of cash as a buffer for a recession-type scenario, while companies are pretty concerned about some of the headwinds they face whether they be economic, political or regulatory.”