A forthcoming period of stock market volatility and more challenging economic times is a welcome relief for Alexandra Altinger, chief executive of JO Hambro Capital Management.
A conviction investor, the company's fund managers thrive on "dispersion" in the stock market and the chance to prove the value of active investing.
Altinger says: "Things are surfacing more — what that means in terms of active equities from a performance standpoint, I remain quite optimistic because we have a number of high-conviction, high-alpha fund managers and we do very well whenever the environment changes. That kind of environment bodes well for active managers.
"It's more difficult for us if you don't have much dispersion. What you don't want if you're active, you don't want to have low dispersion, such as within sector classes, you don't want a [period] like that we've just passed through where it's all about capturing beta."
JO Hambro is a high-conviction, high-alpha type of fund manager, with global and UK funds. Its Global Select Fund is £1.18bn in size and has returned 27 per cent over the past five years, although its benchmark has delivered 49 per cent — however, there was a strong period of outperformance from 2020 to 2022.
But JO Hambro's commitment to high-conviction and high-alpha strategies means its funds may not be to the tastes of all retail investors; its relationships with financial advisers are crucial.
Altinger says: "We have a very strong footprint with intermediaries — they will take our strategies and sell into the end client." It is important that the business develops its footprint in the UK, she adds.
But retail investors have their limits in relation to what a conviction fund manager is able to do.
"Retail investors have a reputation of investing in strategies that have just gone through a really strong period of performance. We tend to see retail clients look at past performance — often, it tends to be that retail chases performance," she explains.
"Institutional clients tend to be more sophisticated. So institutional clients might look for entry points, looking for exposure when the strategy is in its trough. No manager can always outperform year after year, there's always going to be a cycle. But institutional tend to look through the performance cycle and decide it might be a good point for them to come in."
As a consequence, Altinger is planning to market more of the company's strategies to the institutional market, to counteract the prevarications of retail.
"The types of products we have, some of them aredeep-conviction value funds that tend to have tracking errors. They outperform really strongly, but when they underperform, they underperform strongly," she says.
"It comes down to the client or clients' overall risk appetite — we might say the retail investor has less risk appetite than institutional investors that are investing for five years or seven years. If I think what we do really well, do they lend themselves more to an institutional client base?"
