The recent market volatility is here to stay, and is the ideal ground for active managers to prove their worth, says Liontrust Asset Management chief executive John Ions.
His comments come after Liontrust’s results were released today, which showed assets were hit by the volatility in China and turbulent markets in the year so far. The manager lost £183m in market and investment performance, after seeing inflows of £110m.
However, Ions thinks future volatility will play into active managers’ hands.
“I don’t mind volatility to the extent those are the areas where you can show your advantage and the skill of fund managers come through,” he says.
“I think that should suit the active fund manager where they have the added value of decision making,” says Ions.
For index funds there has been a “very good backdrop for them. When you’ve got excess liquidity in the system most things tend to rise. Where you’ve got more focus and tightening of markets and interest rates rising the value an active fund manager can add will begin to show in the relative numbers,” he says.
The tightening of monetary policy will also help Liontrust more broadly, says Ions, as it has a natural tilt to quality stocks, which have been out of favour in recent years.
“I think we will benefit from the end of QE. We might have suffered a bit more performance wise in the past couple of years as our strategy and process have a bias towards quality,” he says.
“Quality has been the least rewarded sector of the marketplace but stands in good shape going forward,” he adds.
However, Ions says he wants to ensure the investment offerings at the firm remain focused and does not want to turn Liontrust into “all things for all men”.
The asset manager is launching a UK micro cap fund and water and agriculture fund in the coming months, and is on the hunt for more talent.
“We have seven teams, we don’t necessarily want to be all things to all men, we’re not looking to replicate every asset class,” he says. Instead, the firm is looking for “people who we think have a good, strong investment process with products where we think we can add value and take it forward”.