The Fund Managers working from the kitchen table during the lockdown
Find out how Barclays’ Fund Managers have continued to manage investors’ money during one of the most fraught periods of market volatility in history.
As office workers spend lockdown working from home, some of the main challenges have included intermittent broadband and what to wear during a video conference meeting. But for Fund Managers, their focus has been to continue managing their investors’ money during one of the most fraught periods of market volatility in history.
At the end of this year, we will look back and try to assess how Fund Managers have fared. To understand who the winners were, much of the focus will no doubt be on performance, because performance is the outcome that we can all see and that we all ‘feel’. But there is another part of the fund management business that is less visible, and without it there would be no performance.
The Fund Selection team at Barclays keep close to the Fund Managers managing the funds held in our clients’ investment portfolios, not just to understand what’s driving performance and what the Managers are buying/selling, but also to ensure there is a robust ‘operational’ risk framework in place.
Operational risk encompasses all the business resources and processes needed to support the investment activities and operational know-how needed for the Manager to execute and sustain the investment strategy. This is everything from IT systems and cybersecurity to compliance and counterparty management.
Like a Formula One racing driver, it’s impossible to win without a strong and robust operational team and structure behind you.
Every company has a Disaster Recovery Plan, which would typically result in the entire workforce moving to another office in the event of something catastrophic like a natural disaster or a fire. But this pandemic has been different, as it has resulted in the complete opposite of keeping the workforce together.
At times like this, companies implement their Business Continuity Plan to keep operations as normal as possible. As part of our due diligence process, analysing Fund Managers, we place great emphasis on this. And a number of Fund Managers have been tested in the recent past. We have had a London-based company invoking their plan due to a flood in the basement, and a Florida-based business who have invoked their plan twice during the last few years on the back of powerful Category 5 hurricanes making landfall.
In fact, one of our Managers, based in Los Angeles, were all at home earlier this year testing out an earthquake business continuity plan when the news came through that they all had to remain at home. To date, all our Managers have successfully implemented their plans.
Technology being tested
The current situation is quite different to anything we have seen before. The last few months have really tested the operational structure of fund management companies. In particular, technology and computer systems have been tested to the brink, especially in terms of data security while using home broadband to help manage billions of pounds of client money.
Simple things like placing trades in funds have involved setting up workplaces at home with multiple screens and ultrafast fibre optic broadband. One particular fund management company has created an environment where only the traders have returned to the office earlier, in order to use the in-house technology. This is particularly important, because many Fund Managers tell us that trading activity has been significantly higher than normal.
No more meetings?
So, while we are comfortable with how the fund management companies have been operating during the last few months, what about the Fund Managers themselves?
Whenever we meet a new Fund Manager, they boast about the number of face-to-face meetings they have with company management, and about how the investment teams sit close to each other, which helps to swap ideas and initiate debate. How is this panning out when everybody is working from their kitchen table? It’s actually been really interesting. The overriding message is that Fund Managers are finding even greater access to the management of companies they invest in. There are two main reasons why.
The first is because at times like this, companies need to keep very close to their shareholders. As the economy, and society, returns to some kind of normality, companies will emerge looking quite different. While some businesses will have thrived during the lockdown, others will have been ravaged by months without any revenue at all. These businesses are sticking very close to their shareholders, partly to keep them updated on business, but also to raise new money via the equity of bond market, to see them through the difficult period.
The second reason why is quite simple – video conference meetings have saved valuable travel time, which means company management can participate in many more meetings. Fund Managers are finding it much easier to set up meetings. They have participated in more meetings than ever before. And when it comes to the big industry conferences, the videoconferencing method means the whole team can now attend, instead of sending just one or two members in person.
Back to life
Overall, Fund Managers are coping. Actually, they’re doing better than just coping. It could well be that much of the operational world that we live in today, such as working from home and video conferencing, will become commonplace going forward. When change is thrust upon is, we tend to take big strides. At Barclays, we have a due diligence process in place which meant we were extremely confident that the Fund Managers managing our clients’ wealth have sufficient processes and safeguards in place to carry on as usual.
The importance of a robust and repeatable investment process is paramount in every part of the investment journey, whether that be the Fund Manager deciding which shares to buy or the end investor deciding which fund to buy.
At Barclays, we have full confidence in the ability of the Fund Manager that once worked in a large open plan office in the heart of The City, to carry on doing exactly the same job perched at the end of the kitchen table at home. And the reason is because we have a robust process in place behind the selection of every fund that we use in our client portfolios.
And while all eyes will be on performance to judge the winners and losers of 2020, we have our eyes firmly fixed on everything that supports the Fund Manager, to enable them to deliver that performance during any market or social environment.
Things to consider
The value of investments can fall as well as rise. You may get back less than what you originally invested.
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