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    Bonus Interview: Robyn Grew, Man Group CEO

    enSeptember 18, 2023

    Podcast Summary

    • Managing risk in uncertain financial marketsUnderstanding and managing risk is crucial for successful investing in uncertain markets. Transitioning from top-down market considerations to bottom-up earnings and cash flow analysis can be challenging during market shifts.

      Managing risk in uncertain financial markets is crucial, and it's essential not to focus solely on expected return or wealth. Markets have been challenging due to COVID-19, which followed a prolonged period of low volatility and easy returns. When the Fed responded to inflation by raising interest rates aggressively, markets were caught off guard, leading to a shift from top-down market considerations to bottom-up earnings and cash flow analysis. However, this transition didn't occur as expected, making it difficult for portfolio managers to navigate the markets effectively. In essence, understanding and managing risk in the face of uncertainty is key to successful investing. To learn more about managing risk in financial markets, listen to Katie Martin's discussion with Robin Grew, the chief executive of MAN Group, on PGIM's The Outthinking Investor podcast.

    • Unpredictable economic landscape and market performanceDespite challenges, global stocks have performed well this year, but economic difficulties persist and the Fed's inflation control efforts remain uncertain

      The economic landscape and market conditions have been unpredictable, with various factors such as geopolitical events, COVID-19 impacts, and historical context making it difficult to accurately forecast market performance. Despite widespread bearish predictions, global stocks, including the US market, have performed well this year. However, the success of a few tech stocks cannot be ignored, and economic challenges persist, including tighter financial conditions and underperforming recoveries in some regions. The Fed's ability to control inflation without causing significant economic damage remains uncertain, and the possibility of further rate hikes continues to be a topic of debate.

    • Navigating Uncertainty in Tech StocksPortfolio managers face uncertainty in tech stocks, requiring adaptation and effective use of AI tools to navigate the market.

      The current market situation, particularly in relation to tech stocks, has left portfolio managers feeling uncertain and in a state of adaptation. While there is a widespread belief in the transformative potential of AI and related technologies, the market performance has not matched expectations. This has led to a sense of unease, especially as central banks navigate inflationary pressures. Despite the challenges, it's clear that technology continues to play a significant role in business and finance, with firms like Man Group heavily invested in tech, quants, and data scientists. The key skill for asset managers is to adapt and effectively utilize tools like AI to navigate the market, rather than being entrenched in outdated methods. The US market has seen significant growth, but the absence of tech stocks makes the overall performance less impressive. The UK and Europe are lagging behind the US in terms of market performance and inflation management. Ultimately, the goal is to achieve a "soft landing" in the economy, which would mean muted growth and a jobs market, rather than a hard landing with high growth.

    • Impact of Political Change on Inflation and MarketsAmid political changes and potential inflation, having a diversified portfolio with multiple strategies can help manage risk and potentially provide better performance in volatile markets.

      Inflation, historically, is difficult to completely eliminate and can re-emerge even after a period of low inflation. Central banks and governments may not have the appetite to take tough measures to stamp it out, especially during times of political change. Half the world's population is facing elections in the next year, which could impact monetary policies. Inflation could lead to volatile markets with bond yields and stock prices moving in tandem. Amid this uncertainty, having a diversified portfolio with multiple strategies could help navigate the markets. Mangrove, for instance, has various business engines, including MacroCon, EquityCon, CTAs, discretionary business, and private markets business, each offering different strategies. This diversification can help manage risk and potentially provide better performance in volatile markets.

    • Managing risk and exposure in complex market conditionsSkilled asset managers can help navigate refinancing needs in corporate real estate market, finding value in complex market conditions through flexibility and expertise in both traditional and private assets.

      The current market conditions, characterized by inflation, high interest rates, and liquidity challenges, have increased the importance of actively managing risk and exposure across an investment portfolio. The denomination effect, where the value of illiquid assets like private equity becomes more significant as liquid assets are sold, highlights the need for asset managers to be flexible and dynamic in identifying opportunities in both traditional and private assets. The upcoming refinancing needs in the corporate real estate market, estimated to be around $1.4 trillion by 2027, present an opportunity for skilled asset managers to help navigate these challenges. Despite the difficulties faced by some private equity houses and the doom and gloom surrounding the industry, there is still a place for private equity investments, particularly in specific sectors. Overall, the financial markets and asset managers play a crucial role in finding value in these complex situations.

    • Managing Unexpected Expenses and OpportunitiesDiversify portfolio, stay informed, and maintain flexibility for managing unexpected expenses or capitalizing on opportunities.

      Having liquidity and flexibility in your investment portfolio is crucial for managing unexpected expenses or capitalizing on opportunities. This can be achieved through a diversified portfolio with various asset classes, strategies, and risk profiles. Additionally, staying informed about global trends, such as AI, climate change, and legislative changes, can help investors adapt to shifting market conditions and potential inflationary pressures. While it's impossible to predict exactly where the next market disruption will come from, being prepared and open to change is essential for long-term financial success.

    • Embrace a nimble and dynamic investment approachFocus on diversified portfolios, collaboration with asset managers, understand risk profile, embrace failure, encourage innovation, and value diverse perspectives for successful investment strategies.

      Successful investment strategies require a nimble and dynamic approach, with a focus on diversified portfolios and collaboration with asset managers. This approach involves understanding one's risk profile and finding customized solutions, rather than simply buying products. It also necessitates a culture that embraces failure as a necessary part of success, encourages innovation, and values diverse perspectives. This culture should allow for open debate between bulls and bears, and should not favor one viewpoint over another. By fostering a collaborative environment where ideas can be freely exchanged and acted upon, the next best idea is more likely to come from within the organization rather than from the top.

    • Quant vs Discretionary Teams: Different Approaches to InvestingQuant teams focus on sectors using asset-agnostic models, while discretionary teams make individualized decisions based on company understanding. Collaboration and recognizing unique strengths are essential in managing savings and pensions.

      While both quantitative and discretionary teams value technology and data to enhance their investment strategies, they have distinct approaches. Quant teams use asset-agnostic models, focusing on sectors, while discretionary teams make individualized decisions based on their understanding of specific companies. This difference can lead to challenges when economic or geopolitical factors deviate from market expectations. However, the collaboration between these teams, recognizing their unique strengths and learning from each other, is crucial. Ultimately, the responsibility of managing people's savings and pensions drives the teams to work diligently and adapt to the ever-changing financial landscape. The current era, with its increased regulation and decreased speculation, may present its own unique challenges, but the importance of staying connected to the core mission remains constant.

    • Investment environment demands strategic approach, use of advanced toolsTo stay competitive in the investment industry, portfolio managers must understand risks, leverage AI and machine learning, and invest in technology for efficient analysis.

      The current investment environment demands a more thoughtful and strategic approach from portfolio managers. With the cost of money no longer being insignificant, understanding the risks and potential failures of investments is crucial. This data-rich era necessitates the use of advanced tools to sift through vast amounts of information efficiently. While there's a growing opportunity to leverage AI and machine learning, it's essential to be cautious and responsible when utilizing these technologies. The focus should be on enhancing the ability to understand companies, markets, and their impacts better, rather than relying solely on automation. Fund managers who fail to invest in technology and equip their teams with necessary tools risk falling behind. The investment industry is rapidly evolving, and staying at the forefront is essential.

    • Navigating Volatility: Stay Informed, Diversified, and PatientInvestors should stay informed, maintain a diversified portfolio, and remain patient during market volatility to achieve long-term financial goals.

      In today's economic climate, investors, whether professional or amateur, should expect increased volatility in various asset classes. This can be psychologically challenging when seeing the value of investments decrease. However, it's essential to understand financial markets as a barometer of the economy and maintain a diversified portfolio. Retail investors should stay informed about their investments, communicate with trusted advisors, and ensure they're comfortable with the management of their funds. During market downturns, it's crucial to remember that selling low and buying high is a common trend. While it may be tempting to chase after trendy investments like meme stocks or crypto, maintaining a diversified portfolio and focusing on stable investments like government bonds can be more beneficial. Additionally, considering the tax implications of investments is essential. In summary, staying informed, diversified, and patient are key strategies for investors in today's volatile market.

    • The Importance of Understanding Liquidity NeedsEffective financial planning involves understanding cash flow, accessing funds, maintaining a financial cushion, communicating with stakeholders, and proactively managing liquidity.

      Understanding your liquidity needs is crucial for both personal and business finance. Robin's insights emphasized the importance of having a clear grasp on cash flow and access to funds, especially during uncertain times. It's essential to plan ahead and maintain a financial cushion to cover unexpected expenses or opportunities. Additionally, Robin emphasized the role of communication in managing liquidity. Keeping open lines of communication with investors, lenders, and partners can help ensure a more stable financial situation. Lastly, Robin shared her upcoming new role and wished her listeners good luck in their own financial endeavors. As the conversation concluded, everyone expressed gratitude for the valuable information shared. Overall, the discussion highlighted the importance of proactive financial planning, effective communication, and a solid understanding of liquidity needs to navigate financial challenges and opportunities.

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