Money managers on crypto and what they won't invest in

By Morningstar |  06-01-22 | 
 

A few leading fund managers from across the globe were asked three specific questions. Their insights are valuable to any investor.

Eva Sun-Wai, M&G

What would you never invest in? Cryptocurrency assets or a company such as Tesla where there is far too much premium built in on one person.

Cryptocurrency: Public Enemy or Pioneering Proposal? I do not like it. Economics states that the more crypto is used in the market, the higher its value should be. In reality, Bitcoin for example trades with zero correlation to its use - it is purely a volatility trade.

Best advice you’ve been given? Never forget that as fixed income investors, fundamentally we are investing in issuers that can repay the debt we are lending them. This sounds simple but sometimes you can lose sight of the total basics.

Russell Korgaonkar, Man AHL

What would you never invest in? Fine wine, would be my favourite. It improves with age, grows scarcer over time, and, if it all goes wrong you can drink it. So to answer your question, bad wine, for almost exactly the opposite reasons.

Cryptocurrency: Public Enemy or Pioneering Proposal? The technology is here to stay, and will revolutionise banking. Investing in it is a bigger challenge. I read the other day that a cryptocurrency called "Omicron" rallied by 900% on news of the Covid variant with the same name. Go figure!

Best advice you’ve been given? Never waste a good crisis.

Gerrit Smit, Stonehage Fleming

What would you never invest in? Anything I do not understand, or anything where factors beyond management's control determined the destiny of a business. I also do not want to capitalise on anything that is destructive to humankind.

Cryptocurrency: Public Enemy or Pioneering Proposal? I do not understand it well enough, fear potential regulation and new technology may continue disrupting it in some form or another.

Best advice you’ve been given? Think strategically.

Charles Hamieh, ClearBridge

What would you never invest in? Any company where it was not immediately obvious what the link was between its business model and shareholder value. For many companies, this is much easier said than done. On a personal note, I would never invest in a business lacking a social license to operate Companies across all asset classes need to contribute to society moving forward.

Cryptocurrency: Public Enemy or Pioneering Proposal? I was certainly a sceptic at first. And I still would be concerned about the risk of holding some of the more speculative cryptocurrencies. Increasingly though, like many, I can see a role for the more institutional grade cryptocurrencies as part of a balanced portfolio.

Best of advice you’ve been given? Be a pragmatic investor. As the world becomes more complicated--and as return expectations fall--one can’t necessarily approach investing anchored in the view that history will keep repeating itself. Having a long-dated approach to assessing assets and executing views in the listed markets is at the centre of that.

Omar Negyal, JP Morgan

What would you never invest in? Stocks without dividends.

Cryptocurrency: Public Enemy or Pioneering Proposal? I’m happy to watch developments from the sidelines!

Best bit of advice you’ve been given? The best strategy is the one you stick to. Now, one needs to have a sensible approach, but it’s just as important to be disciplined. I try to stick to my philosophy and process even in tough times.

Alex Howson, Pictet

What would you never invest in? We only invest in foods that fit planetary and health boundaries – ie. that have a high nutritional value relative to environmental impact, in order to maximise the positive impact on health and planet. This is why foods with empty calories such as carbonated soft drinks, confectionery, fruit juice with added sugars, or food rich in transfats like pizza, cookies etc. do not fit our definition of the theme. Beef and processed meats are also excluded because of their environmental impact and they are deemed to be a type 1 carcinogen according to the World Health Organization. We also wouldn’t invest in unhealthy fast food restaurants, suppliers of plastic food packaging, or manufacturers of fertilizer and pesticides due to their environmental impact.

Cryptocurrency: Public Enemy or Pioneering Proposal? The underlying blockchain technology is hugely interesting and I am sure some investors could make fantastic returns from cryptocurrencies. But I don’t own any myself. I can’t justify investing in an asset that has no intrinsic value and where there is no clear method of how to value it. I would like to see a clearer regulatory framework and a solution to its enormous energy usage and emissions.

Best bit of advice you’ve been given? Don’t look at emails while playing with your daughter.

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