MLC Chief Investment Officer, Jonathan Armitage speaks with Rebecca Collins, Research Manager, MLC, about concerns surrounding future earnings growth, a potential slow down in GDP and the trade war between the US and China.
Rebecca Collins: Hi and thanks for joining us today. My name’s Rebecca Collins, Research Manager for MLC and today I’m joined by Chief Investment Officer, Jonathan Armitage. Thanks for joining us today Jonathan.
Jonathan Armitage: My pleasure.
Rebecca Collins: When we met in October, we were talking about the volatility that was starting to appear in the markets. What’s been happening since then?
Jonathan Armitage: We’ve obviously seen a continuation of that volatility and a significant increase in gyrations in equity markets, but also bond markets as well. And I think very similar to what we saw at the start of October, it’s been a continuation of concerns around future earnings growth, apotential slowdown in GDP insignificant developed markets and also, continuing concerns around trade, particularly with the US administration’s focus on tariffs. And the potential follow on impacts that that could have on global trade, and particularly with China.
Rebecca Collins: With all the concerns in the equity markets, how is MLC managing investors’ money in this environment?
Jonathan Armitage: The fundamental way that we invest our clients’ money, remains exactly the same. In terms of some of the things that we have been able to do to mitigate the impacts to volatility, our focus has been on what you might term, alternative investments. And so to give you just one example, we have within our Horizon series and also Inflation Plus, the low correlation strategy. And that is designed to have, as the name suggests, a very low correlation with equity markets. The reason that’s important is that in times of significant market or equity market volatility, those investments tend to react very differently.
And so to give you some simple numbers, Australian equities were down over eight per cent in the last three months of 2018. And the low correlation strategy was actually up over two per cent, over the same time period. So one of the things that we focus on when we construct our portfolios is including aspects, which have a very differentiated outcome for our clients. These investments work well when you’re seeing more volatile markets and particularly providing different outcomes, particularly to equities. Especially when those we’re seeing weak periods of equity market performance.
Rebecca Collins: With the hedge fund strategy, is that a single manager, or a manager of manager approach?
Jonathan Armitage: We use a variety of managers and a variety of different strategies. Some of which are equity focused, others which actually look at a wider variety of investments. But collectively, they produce a very different outcome than you would expect from a pure equity market exposure.
Rebecca Collins: So a proper diversification tool?
Jonathan Armitage: Absolutely and something that we think’s very important, when looking at peoples’ long-term investment diversification.
Rebecca Collins: Thanks for your time today Jonathan and thank you for joining us.