Schroder Investment Management’s Karl Dasher has articulated the firm’s ambitions for its global macro team based in London, featuring Asia as an increasingly important component.
Speaking to AsianInvestor after a two-week trip to Latin America, the firm’s global head of fixed income explains the drivers behind the strategy and points to some forthcoming fund launches.
He also underlines his conviction that Asia is heavily under-represented in the risk budget of most global bond investors, saying the region’s relative value opportunities set it apart as a secular story that needs to be more prominent within a global macro framework.
“When we talk to investors about what we think is the best idea from a secular perspective we always end up coming back to Asia,” says Dasher. “We think the secular currency story in Asia is going to offer a strong return characteristic going forward.”
This February Schroders added Asian fixed income manager Julia Ho from Western Asset Management in Singapore to its London-based global macro team led by Bob Jolly, as revealed by AsianInvestor.
Ho has been brought in to act as the link between the Asian opportunity set and lead global macro portfolio manager Jolly. “She will be one part analyst and one part Asian portfolio manager, so to speak,” suggests Dasher.
“One of the inevitabilities is the continued rise of Asia in terms of its representation in global indices and risk budgets. We wanted to make sure the macro capability we have been building has a very strong commitment to Asia, not just from a beta but relative value perspective.”
Asked if Ho would continue to be based in London or would relocate to Asia, he responds: “What you will see in time is people moving back and forth between the regions. Generally speaking, London is the hub of global macro, and for good reasons: the time zone and the skill sets. But clearly we need very strong linkages within both eastern and western hemispheres.”
Ho’s role is a new one at Schroders, as was Jolly’s when he started last September and Philippe Lespinard’s when he joined as CIO in November 2010. Both Jolly and Lespinard have over two decades of global macro experience, notes Dasher.
“When I took over the [fixed income] team in 2008, most of our focus at the time was on credit with a deep and global team of more than 30 credit analysts,” he recalls. “Frankly that was fine because credit was such an extraordinary opportunity at the time.”
But before long Dasher started constructing a business plan to build the firm’s macro capabilities on the understanding that “we are in the midst of a deleveraging supercycle and a lot of imbalances in the world will be reconciled through the FX markets”.
“When you look at everything that was lining up, it was leading me to believe that macro was going to be a very big part of the required skill-set to navigate that environment,” he adds.
Dasher estimates that Schroders is now 70-80% along the execution curve of its plan, with a macro multi-sector team of 14 based in London, including credit portfolio managers, European and UK rates portfolio managers and quantitative resources.
He confirms that the team will be launching macro funds in the next few months, with currencies, rates strategies and relative-value trades in credit all big components in the risk budget. Regionally the products will be diversified across major and “extended” markets.
“If we find relative value opportunities within emerging markets, we want to be able to incorporate that into the macro portfolio,” adds Dasher. “This is going to be a set of strategies with different benchmarks.”
Various products will be available for different global audiences, he notes, with some of its higher 7-8% volatility products targeted at professional investors, and some built more around the premise of unconstrained bond funds directed more towards private clients.
Dasher says that institutional investors have already articulated interest in these products in the US, UK and Europe. “My general view is that the vast majority of the lead investors [in these strategies] will probably come from those two domains,” he suggests.
While he believes there will be interest in Asia in future, he notes that investors in the region are more interested in its global aggregate funds at present.
“I am not sure how quickly Asian investors will move further up the curve in terms of tracking error in those types of strategies,” he explains. “Right now in Asia, and Hong Kong in particular, there is a pretty robust market for 1-2% tracking error global aggregate mandates.”
Dasher adds that this has been a two-year strategic plan in the making to build a team with a minimum 10-year horizon in terms of execution cycle.
Asked if he expects to add more Asian managers to the strategy, he says: “I think over time that is quite feasible. In the months ahead you could see some additional hires within the global and sovereign space, but those will not necessarily be Asian focused.”