The PODfolio

We are joined by the three hosts of the “Oh No You Didn’t!” podcast to explore three “pub debate” topics for both the music industry and the investment industry: 1) Were things really better “back in the day”? 2) Is the gap between amateurs and professionals narrower than before? 3) Are there too many people involved in the industry?

How do you solve a multi-layered problem like sustainability? With so many connected parts, addressing one aspect at a time can result in your earlier good work coming undone. Drawing strategic inspiration from the Rubik’s Cube, Monique talks about the use of organisational processes and how solutions can be socialised across the industry with systems-level thinking. Just as it is satisfying when all the coloured squares line up, she describes how investors and organisations can see satisfying and lasting progress despite fast-changing sustainability needs.

Marisa and Tim introduce the Fundamental Attribution Framework developed by the TAI, which breaks down manager performance into elements that are based on skill (and hence repeatable) and those that are largely outside of the manager’s control. The underlying calculations are being released as open source code for free access by all industry participants.

Going beyond the usual headlines around digital assets, we discuss the wide-ranging uses of crypto-currencies (wider access to banking facilities, international remittances) and crypto-tokens (ticketing, royalties, decentralised finance). What are the things to think about from an investment perspective?

Dany Lemay, Head of Investments Montreal, talks about his long involvement in competitive short track speed skating. How has this experience shaped him as a finance professional, and what parallels can be drawn - in terms of risk taking and dealing with uncertainty - between skating and investing?

Sarah Hopkins and Arun Singhal talk about index investing, and the emergence of smart beta strategies that blur the line between active and passive approaches. We also discuss a new index incorporating the Climate Transition Value-at-Risk (CTVaR) metric to increase exposure to the predicted “winners” in a transition to a greener economy.

We examine the tension between our heart (our personal and professional values) and our head (hard-nosed finance and economics) when it comes to making investment decisions, and how their interaction is driving the key investment themes for 2022 and beyond.

Eleanor Huish, Abbie Knight, Harry Keay, Josh Naylor (Investment Consultants at Willis Towers Watson) are all based in our Reigate, UK, office. They are amongst the “rising stars” of our investment practice, each with around 5 years of investing consulting experience, working with both advisory and fiduciary clients. They’re always up for a laugh and super brave for taking part in our quiz!

An excerpt from Nicolette DiMaggio’s book Stock Explore. Elle learns about her first stock with the help of Sam the magical owl. Later on her journey, Elle will go on to acquire five investment superpowers.

An excerpt from Will Rainey’s book Grandpa’s Fortune Fables. Gail tells her new friend Boris one of her Grandpa’s stories to help him understand that earning money is not solely about working hard.

To kick off Season 2, Nicolette and Will talk about the power of storytelling in explaining investment concepts within a professional setting. They also tell us about their children’s books - Nicolette’s Stock Explore and Will’s Grandpa’s Fortune Fables - and the wider work they are doing to educate children via Stock Explore LLC and Blue Tree Savings.

In the concluding part of our asset class mini-series, Craig Baker, Global Chief Investment Officer at Willis Towers Watson, discusses best practice portfolio construction under a Total Portfolio Approach, and why it’s expected to deliver better returns than the traditional Strategic Asset Allocation Approach. He also addresses a number of related questions around active vs passive, simplicity vs complexity, and conflicts of interest.

Ben Leach and Joseph Bassey-Duke, senior members of WTW's Private Markets Solutions team talk about private equity investments. Companies are increasingly choosing to stay private these days, given the ready availability of private funding and greater freedom to pursue a long-term vision. We discuss the opportunities for generating enhanced returns, and the mechanics of getting into (and exiting) these investments.

Sara Rejal and Victoria Vodolazschi discuss how hedge funds have moved with the times, and play a useful defensive role in a well-rounded portfolio. Have they really shaken off their “Wolf of Wall Street” reputation to embrace Inclusion and Diversity? And do they still have the “magic sauce” that simpler / more mechanistic approaches cannot replicate?

Sara Rejal and Victoria Vodolazschi talk about alternative beta strategies as a way of diversifying away from mainstream market exposure (or “beta”). Examples include risk premia funds and strategies based on investor behaviour, often “systematising” approaches previously seen in hedge funds. There’s been a lot of innovation in this space in recent years that’s still under the radar.

In the third of our asset class mini-series, Duncan Hale discusses the case for investing in illiquid assets, including the additional returns available. We go through interesting examples especially in the area of Secure Income Assets. For the right investor, these assets boast very attractive features including attractive yields, long-term inflation cashflows, strong security and positive ESG impact.

Kate Hollis and Eunice Han talk about bond investing in the second of our asset class mini-series. How can an institutional investor get to grips with so many different ways of investing in credit, and the attractive opportunities in areas outside of the mainstream markets? We also talk about the importance of considering sustainability in both avoiding downgrades and seeking returns linked to ESG themes.

Heidi Liling and Stuart Gray talk about equity investing in the first of our mini-series exploring different asset classes, starting with a look behind the headlines around the market rally and the Gamestop “short squeeze”. We then consider the potential pitfalls of both passive and active investment – the former is challenged by increased concentration and structural changes of climate change, whereas the latter should mean more than hiring a good manager and hoping for the best.

What sorts of new year resolutions should we be considering for our investment portfolios? Our three guests are cautiously optimistic about future returns, especially in the near term. We talk through three key macro-economic themes – central bank and government policy shift, China’s financial opening and long-term sustainability – and translate these into portfolio actions. And how well have our recommendations from last year fared through the Covid crisis?

Adam Gillett, Head of Sustainable Investment, and Shahrazad Khan, Sustainability Specialist, both at Willis Towers Watson talk about the regulatory momentum behind sustainable investment and the actions that investors can and should take on this front. Institutional investors have great power to influence change – the time has come to exercise this power and in particular to stop ignoring the impact investment decisions have on the wider world. In dealing with climate change, a “carbon journey plan” could be a useful framework for setting a strategy and putting actions into context.