“For long term investors, time is your friend” says Bhavin Shah

by | May 15, 2024

Given the considerable uncertainties in today’s world, Bhavin Shah, portfolio manager of the BNY Mellon FutureLegacy fund range, reflects on the value of taking an active approach to Multi-Asset investing with flexibility and having a long term view as core to building fundamentally diverse and robust portfolios. 

You’ve probably heard investment managers tell you the world is more uncertain. Well, as someone once said, “prediction is difficult, particularly when it involves the future”. For anyone making important decisions about where best to invest their clients’ money, the future inevitably looks more uncertain than the past. 

A changing world 

However, there is no doubt that the nature of risks in 2024 have changed. Since 2022, we have seen the long-anticipated return of inflation, war in Europe and the Middle East, historically top-heavy global equity markets driven by a narrow set of US technology stocks and stubbornly rising national debt. Against the backdrop of an ongoing retreat of globalisation, the coming year will see general elections across several major economies – including the US – and uncertainty about their outcomes could heighten investor nervousness. 

Think long term As an active manager, it is key to understand the difference between short-term headlines and long-term shifts. Over many years, we have found that using a framework of long-term investment themes to direct our search for investment ideas and structure our portfolios, also keeps our outlook focussed on the long term. The themes help us focus on areas where we see structural growth opportunities and avoid areas of structural decline. So, even if you get something wrong in the short run, if you have the structural trend right this a tail wind and time is your friend – and that’s really good for successful long-term investing. 

For example, Newton’s analysts have for a long time had a high conviction in Asian life insurance companies but these have underperformed in the last 6 months due to ongoing turmoil in the country’s property sector and the status of China’s economic recovery. However, as populations become wealthier, they look to protect themselves and their families by purchasing life insurance policies. There is a tipping point as wealth per capita goes through $10k, when the propensity to buy insurance increases exponentially, which is happening across multiple markets in Asia, particularly in China. However, we don’t think these short-term market challenges in China will impact these longer-term structural themes, and we retain a high conviction in these stocks. 

Read about all the latest surrounding Multi-Asset Investment Funds in our inaugural report which is available to readers here.

Fully flexible 

But Multi-Asset investing is not just about a buy and hold mentality. Effective diversification also relies on investors recognising when fundamental changes are under way and having the flexibility to respond. Our Multi-Asset portfolios performed well in 2022 when the 

environment for investing changed as central banks began to raise interest rates. By taking a fundamental and flexible approach we were able to use our universe to adapt to the new environment. Understanding each part of your portfolio and having different parts of the portfolio exposed to different, asset classes, trends and economic sensitivities allowed us to navigate a challenging market backdrop. So, while you have a central a view of the world, your anchor, you want to make sure you have securities with differing sensitivities in your portfolio just in case you are wrong because that helps you pivot, as the environment changes. 

Focus on what matters 

This active approach to Multi-Asset investing, with high conviction in stock selection and flexibility in asset allocation, offers investors the opportunity to navigate long term challenges in support of long-term goals, particularly in retirement. 

We all invest to meet specific objectives, whether it be to meet a client’s liability, income requirements or to build or preserve wealth in real terms. Therefore, beating a benchmark is not the only show in town. This is where we believe active management offers something a purely passive approach can’t, particularly for those getting closer to or in retirement who have more complex needs beyond mere accumulation. 

It’s not about trying to predict the future; it’s about making sure you are building fundamentally diverse and robust portfolios for clients because events will happen, and you will never predict them. 

About Bhavin Shah 

Bhavin joined Newton Investment Management in June 2011 as a portfolio manager in the mixed assets investment team. Bhavin is lead PM on the BNY Mellon FutureLegacy range and is co-lead manager across BNY Mellon IM’s flagship suite of Multi-Asset funds, including the BNY Mellon Multi-Asset Balanced and BNY Mellon Multi-Asset Growth funds. Prior to joining Newton, he worked at SG Hambros for seven years where he was responsible for managing client portfolios focused on absolute return and Multi-Asset strategies.

Related articles

Trending stories

Join our mailing list

Subscribe to our mailing list to receive regular updates!

x