Jamie Mead
Australian fund managers face a test of discipline as geopolitical conflict, stubborn inflation and market swings continue to unsettle investors, according to Jamie Mead CEO at Talaria Capital.
Mead says the current environment, which has been defined by persistent macro uncertainty and volatility, is exposing a gap between fund managers who have a solid investment process and those who are reacting to events as they unfold.
“While it is something we maintain an awareness of, macro factors such as geopolitics and central bank movements are not central to the way we run money,” Mead says.
“The key thing in an uncertain world is to be able reassure your investors and say, ‘let me give you conviction that how we invest your money is not going to change.”
Mead says investors should be prepared to ask the hard questions of fund managers, about what they own, how investment decisions are made and whether the process holds up when markets become unsettled.
“When markets are volatile, a disciplined investment process allows you to distil signal from noise,” Mead says.
“We are looking to buy the cheapest, best quality assets at the lowest price we can afford. That’s it.”
Talaria’s approach is to capitalise on market volatility rather than avoid it, which Mead says is becoming increasingly relevant as investors look beyond traditional shares and bonds for returns.
“We certainly hear from our investors that alternative asset classes are going to continue to form a larger part of the overall asset allocation,” Mead says.
“We do that in a way which means that we can harvest volatility. That’s why we consider ourselves more of an alternative fund rather than being a long-only manager.”
And as alternatives gain ground in institutional and wealth management portfolios, Mead says investors need to scrutinise how those investments are structured, particularly around liquidity.
“Liquidity is one of those things that you don’t need until you need it,” Mead says.
“Investors should understand what they are invested in, but also ask their fund managers how that investment is packaged and what happens if they need to get their money back during a more difficult market.”
Mead adds clear communication between fund managers, advisers and investors is essential to avoid the common pitfalls in client and fund manager relationships.
“For example, investors shouldn’t assume they are diversified simply because they own investments through different structures. An investor may be exposed to the same type of business through listed shares, private equity and private credit. While those investments may sit in different parts of a portfolio, they can still be susceptible to the same underlying risks,” Mead says.
“That’s why the simple practice of communication is an extremely important part of what we do.”
