Brexit, extreme volatility, low growth and uncertainty – these are just a few of the challenges facing the financial sector, and those with exposure to the markets.
Few people pay closer attention to these scenarios than those who work in asset management and are tasked with delivering a return on the investments they make on behalf of their clients.
Among them is Pam Beith, who for the past 30 years has built a career in asset management and since 2009 has overseen the running of Brooks Macdonald in Tunbridge Wells as Senior Investment Director.
With over £8 billion under management, the firm is not a titan of the sector, which is valued in trillions.
However, unlike many of the big players who will only offer a limited range of modular managed options, its speciality in Tunbridge Wells is designing bespoke investment portfolios specific to each client with at least £200,000 to invest.
This process requires a keen eye for investment and a thorough understating of economics.
Ms Beith said: “There is a very specific investment process in place, which all 90 investment managers in the firm have to adhere to.
“If you don’t, you have 90 managers doing their own thing which is a massive business risk.”
She added that to mitigate the risk, the firm puts together a ‘buy list’ of assets, across a range of classes including equities, cash, fixed income and property and more, which managers are allowed only limited deviation from.
Each manager contributes to the ‘buy list’ with their own area of research into a specific sector, allowing them to pool their knowledge and experience.
When building the portfolio the managers have the ability to go overweight or underweight on each asset class, within guidelines, in order to build a customised portfolio which deviates from a more traditional modular approach.
At their client’s request, or with the manager’s discretion if they deem it appropriate, money can even be invested directly into stocks rather than use funds as intermediaries – a riskier option, but potentially more rewarding.
“The portfolios are individually tailored to our clients’ needs rather than be a model whereby everyone who buys into a particular risk modelÂ has the same portfolio at the end of the day.
“For us, someone wanting ‘medium risk’ would probably have an allocation of between just over half to three quarters in global equities, with the rest made up of different asset classes and different markets.
“We are of the belief that although theÂ baulk of our investors reside in the UK, you don’t necessarily have to have all your money invested in the UK.”
She said that over the past year, the firm has been gradually reducing its clients’ exposure to the UK market as the referendum of Britain’s membership of the UK approaches.
And with trust in polling data at an all-time low following last year’s general election, there is still a great deal of uncertainty over which way it may swing.
Instead, Ms Beith said many analysts are now looking at the book makers odds as a key indicator to how the population may vote.
“Depending on the outcome, we expect volatility not just in the run up to the referendum but for a long time after too and the market hates uncertainty.”
Company analysts believe the worst case scenario from the fallout of a Brexit would be the disintegration of the European Union, although this would be extreme.
Ms Beith also thinks London will be able to maintain its prominent position as a leading financial centre, but could still take a knock if access to European markets becomes harder.
“We have kept some exposure to the UK, because if we vote to stay in we believe the market will react positively to that, but we have been paring back in favour of other markets.
“For example we are a bit more positive on Europe, although there are still unresolved issues which are yet to come back into play and there are uncertainties surrounding the impact of a Brexit.
“So there are other areas which at some stage you need to start looking at again, markets in the Far East and Japan for example, which we are quite positive on.
“Typically the US market has in the past done particularly well during the year of a presidential election but we think this year might be slightly different because the candidates are a little more different than we have seen historically.”
She said the company was currently ‘on theÂ fence’ about China.
“Their growth is still far in excess to what we are getting in the developed world but this does not necessarily translate into being a great economy to invest in.
“But at some stage the entry point is going to look more attractive but there has been incredibly volatile conditions in this area which wouldn’t necessarily suit all investors.”
For Ms Beith, 2016 has been the ‘most volatile’ start to a year she can remember, pointing out that proportionally the number of days in which the FTSE 100 has swung by more than 1 per cent either way is at record levels.
“I have been doing this for 30 years and I have never known such a bad start to the year, it is not normal to see so many days with such marked movements either up or down.
“The problem is there is just so much speculation taking place that you have to sometimes ignore the noise and look at the fundamentals and make a decision.”
However, she said the markets remained ‘fragile’ and the high level of volatility would be around for the foreseeable future.
“Until we can actually truly believe we are in for a period of sustained and reasonable growth, and the headwinds we are currently facing are removed, it will remain like this.
“But we are long term investors and so long as you make sure you have exposure to asset classes which are less affected by the peaks and troughs of equities – such as commercial property which can deliver attractive yields at the moment – then we can work towards preserving the portfolio’s capital.
“And simply preserving the capital is our aim for a worst case scenario.”
Brooks Macdonald was founded in 1991 by Chris Macdonald, Jon Gumpel and Richard Spencer and became a publicly listed company when it floated on the Alternative Investment Market in 2005.
Recent performance has been strong, and in the first quarter of the year added an additional £241m in discretionary funds under management, taking the total to over £8bn level.
Last week, Mr Spencer old a 4.3% stake in the wealth firm worth just under £10 million.
PAM BEITH’S CAREER CV
With almost 30 years of experience, Pam Beith is a veteran of the industry. Born in England but educated in Scotland she had originally intended to go to Glasgow University after being accepted to study chemistry in 1978.
However, she took up a summer job with the then named Commercial Union in Glasgow and five years later, found she was ‘still there.’
“By 1984 I had clearly made the decision that chemistry was not for me and looking for promotional opportunities moved down to Woking and two years later started working for a discretionary fund manager in Guildford, where I spent the next 12 years.”
In 1998 Ms Beith was approached by a law firm who was setting up its own Discretionary Fund Management services and asked if she would head up the team there, an offer she accepted.
In 2002 the company became part of Ash-court Asset Management, where she stayed until December 2008. She was then recruited by Brooks Macdonald in January 2009 to head up their new South East branch which they had decided to locate in Tunbridge Wells.
Accepting the job was a big decision, how-ever: “At that stage I thought if I was going to make a move it will be the last move I make and hoped it would be where I would end up retiring at the end of the day.”