It is tough to find a positive regional economic “good news” story right now and any gems resting in the rubble are most likely to be unearthed at the company level, argues Schroders Private Banking.
The US economic position, while showing some improvements, could still spring nasty surprises; China’s once red-hot economy is looking far less perky and the eurozone’s travails just won’t go away. So making money requires investors to drill a lot deeper to discover value, argues Robert Farago, head of asset allocation at the firm, part of UK-listed Schroders.
“In terms of how we approach equities, we have not taken big regional bets; it is more stock-specific. We are favouring high-quality companies; companies that are able to generate dividends. The quality and dividend theme has been very successful. The concern is that have valuations gone up too far?” Farago told this publication in a recent interview at the firm’s offices in Wood Street, London.
“In terms of pure sustainability [by firms], things look a bit expensive [in quality firms]. It is still possible to get some firms for decent value, though,” Farago said.
In such an environment where there is no “easy” macro-economic theme to play on as in the past. The graft of searching for overlooked corporate gems becomes ever more significant, a fact that arguably highlights the positive case for active fund management as opposed to adopting a more purely “passive” stance.
The argument between the “passive versus active” schools of fund management is, probably never going to be resolved, and is arguably a falsely stark choice in the first place. But it is certainly the case that an outfit such as Schroders Private Banking believes it can prove its worth to clients when it is so hard to read the economic signs, as now.
The private banking arm of Schroders may not be the largest in terms of assets under management (£16 billion (around $25.4 billion0 at the end of June), but Schroders is one of the more voluble houses on economic affairs. (In total, Schroders has around £194 billion of client assets under management.) The end-June AuM figure of £16 million was unchanged from the end of December last year, suggesting that the bank has, in a difficult market environment, at least managed to hold client money at a steady level, although it will want to do better than that for client wealth to withstand inflation.
Farago, who has been at the blue-blooded firm since 1994, is also fund manager of the Schroder Managed Wealth Portfolio, a multi-asset unit trust. His investment career started in the post-Big Bang financial era, joining Bankers Trust in 1987. At Schroders, Farago has worked as a senior Pacific Basin fund manager, a member of the global equity team, and alternatives analyst for the multi-asset team.