Angela Lascelles, co-founder and portfolio manager at OLIM, reflects on changes in the investment industry since she began her career and the importance of trust to success.
The centuries old motto of the London Stock Exchange, ‘My word is my bond’, was a defining rule of my early career, and held with utmost regard by the City. When the ‘Big Bang’ heralded the dramatic deregulation of financial services in 1986, much of the investment industry’s previous commitment to this ethos dissolved.
As the distinction between market making and stock broking eroded, the potential conflicts of interest presented by the changes were often detrimental for investors. At that time, I launched OLIM Investment Managers as a beacon of integrity for the profession. This founding principle is one that has only strengthened among our team in subsequent years.
Trust is essential to what we do, and our clients must always trust that we will look after them and have their best interests at heart.
I have witnessed a number of serious market crashes and they all have one thing in common: a recovery. After the secondary banking crisis of 1973-75, we had one of the sharpest bull markets on record, catching many investors out.
Overly cautious investors all suffered from missing out on the prolonged rally following the 2007-08 global financial crisis. The lesson? Don’t panic. Crashes can fuel wild hysteria as investors rush for the exit. These are often the best times to buy, and level-headed investors may have a plethora of golden opportunities at attractive prices.
Investors can readily accessible enormous quantities of high quality information in a way that simply wasn’t possible before the internet transformed the industry. Investment managers used to spend a large portion of their time hunting for the information necessary to conduct an informed analysis. They no longer operate in the dark, and have far greater access through many more mediums than in past decades.
While this makes the job easier, some may argue that the wider availability of information has improved market efficiency and made it harder for managers to identify opportunities to add value. I disagree – more information gives you more chances to find and support undervalued businesses.
The regulatory burden weighs on firms across the financial services landscape, having increased drastically from the days of the Big Bang. It is unfortunate that such extensive regulation became necessary, but crises mired in scandal have, over the years, made it so.
While most regulation is well-intentioned and has transformed practices with investors’ best interests at heart, there is still work to do to refine the framework. Despite ever more stringent compliance requirements, the importance of trust has not diminished.
Decades of harsh lessons have taught the markets that the economy rules. Time and again ministers have been forced to change their economic policies in response to global trends at a higher, macro level. Last year provided two particularly stark examples, with the FTSE100, FTSE250 and S&P500 all rallying despite concerns over the result of the Brexit referendum and Donald’s Trump’s election as United States president.
Investors need to look past the short-term noise and focus on the underlying health of the world’s major economies. While the likes of Brexit may have a longer-term impact on growth prospects, it is important to separate the politically volatile from the economically significant. Investors that are able to do this, while focusing on a business’s long-term prospects, will prosper.