“The guys in the team will probably tell you I’m always arguing the side. America has an amazing ability to reinvent itself just when you are about to write it off,” she says.
With a degree from Princeton University and an MBA from Harvard, Curtin has academic credentials that stand out from the crowd.
Her role as chief investment officer at Close Brothers Asset Management has this year seen her take responsibility for the strategy of three risk-rated discretionary portfolios packaged up as Luxembourg funds in a joint venture with international fund distributor VAM Funds.
The venture represents Close Brothers Asset Management’s first move in recent years away from a sole focus on UK advisers, to satisfy international demand for its discretionary approach.
People’s interest
Curtin explains that the company is very much linked to working with high net-worth private clients through their financial advisers, with £10bn of assets currently under management.
“Our DNA is very much linked to being conservative and to recognising that this is somebody’s wealth and that what we are doing in the markets is not an esoteric exercise; it really is linked to long-term goals and objectives, and to people’s hard-earned money.”
This involves controlling risk, assessing risk and return in thoughtful ways, and embracing diversification as a multi-asset class investor, she says.
The investment style is active, with a long-term strategic asset allocation framework to guide them, which is put together with an external consultant Moody’s Analytics.
“What we are trying to do in our solutions is make sure we deliver the best possible return, looking at the optimal mix of asset classes that would produce that return at the lowest possible risk over a 10-year forecast horizon.”
The idea is to use global equities with non-correlated assets alongside, not in “esoteric Ukrainian bonds” but government and investment-grade stocks and strategic bond funds, and alternatives in such areas as absolute returns, infrastructure and property.
This list does not include commodities exposure because, in their view, the return is not worth the risk.
Curtin is also active in the tactical asset allocation decisions that are a part of the process too. “We all know that markets do funny things in the short term and create lots of opportunity, and have a lot of valuation anomalies. So, we take pride in being an active investor,” she says.
Funds are also selected using a dedicated in-house team that meets the managers on a regular basis.
“There are times when we’ve added two-thirds from asset allocation and one-third from security or manager selection. At the moment, it is probably half and half, and one reason is because there is a whole bunch of the world, and securities, and countries that are in a lot of vulnerability and pain and risk, and there are other things that are actually doing well.
“So you’ve actually had to be quite selective, and we’ve been able to add quite good value in terms of our manager selection in this volatile period.”
Every day, the investment team has a formal meeting and there is also a longer two-hour meeting, usually on Fridays, when they discuss “everything going on in the world and what we think we should do, if anything, about it”. There are also monthly meetings and a four-hour quarterly meeting, where they “exhaustively look at all the things in the world and try to think about any changes we might want to make”.
“We are active and incremental, so you probably won’t see us going from 60% or 70% in equities to suddenly 40%, unless we woke up in the morning and a black swan event had happened that we thought we really can’t get around. The world doesn’t operate that way; you get lots and lots of warning signals.”
Decisions, decisions
So what is the biggest call she’s made during the past year? Curtin explains that in 2014, they were very overweight in US equities as the Federal Reserve was doing QE, there were signs of recovery in the economy, and many sectors they liked, such as healthcare, technology and some of the secular growth opportunities.
When Europe embarked on long-awaited QE in January, Curtin quickly upped exposure to that region, using a passive hedge investment to manage the fall in the value of the euro.
“Most of what we invest in is external managers but if we think it’s a macro move and we can do it more effectively through a passive instrument, that’s better for clients.”
She points out that they did something similar when Japan embarked on its QE, when they went overweight in several successive stages.
Elsewhere in Asia, she also mentions a long-term position in China, through a 2% holding in the GAM Star China Fund, not related to the “crazy, manipulated A-share market”.
She says this position is effectively playing healthcare and internet sectors in China and, in addition, looking at state and enterprise reforms.
“We’ll keep that as a toehold but we are massively underweight in emerging markets, with nothing in Russia and Brazil.”
From an equity perspective, the portfolio is geared towards the developed world. “We still think there’s a recovery in the developed world, albeit more modest than people would like. And there are a number of sectors that are leveraged to completely different secular growth plans that we think are very interesting.”
On the rebound
Curtin offers perspective on the volatility in markets by pointing out that if there are 10% corrections in markets, 80% of the time the markets rebound within six months.
“So, the question is, ‘Are we in the 80% or the 20%?’ The 20% typically comes in a global recession, so we ask ourselves, ‘Are we in a global recession?’
“China is slowing. We think a lot of emerging economies are in a recession and will struggle. We think that is having reverberations across the world and slowing the world a bit, and certainly having reverberations in global industrial companies.”
Curtin sees the US still growing, albeit not as fast as everyone would like.
“Europe and Japan are improving and the UK is alright, so that is where we focused,” she says.
“Within that, we are very focused on managers in the sectors, in the types of companies we like. Those with good cashflow and good dividend yields, which we think are fairly resilient in a crisis.”
Five core funds used by Close Brothers Asset Management
Lindsell Train Global Equity
Michael Lindsell and Nick Train co-founded this boutique in 2000. They aim to buy good companies and hold the shares forever, finding most of their companies in the consumer franchise area and the internet and media arena. They hold such stocks as Unilever, Heineken and Nintendo.
New Capital China Equity
Mansfield Mok has more than 20 years of investment experience and was co-manager of the GAM Star China Fund before launching this fund in 2012. He is based in Hong Kong and is looking for companies with a re-rating potential. The portfolio is looking to benefit from reform of state-owned enterprises and has limited exposure to banks and energy companies.
Polar Financial Opportunities
Portfolio manager John Yakas brings a wealth of expertise to investing in financials, with more than 26 years’ experience in financial services. His portfolio is geared towards different sub-themes – US large-cap banks, challenger banks in the UK and emerging market asset managers. The financial sector remains attractively valued, offering exposure to the global recovery. Banks will benefit from the inevitable rise in US interest rates.
Neptune European Opportunities
Rob Burnett, portfolio manager for more than 10 years, combines an appreciation of the key drivers at the macroeconomic and sector level with bottom-up stock selection. He is positioned for a domestic recovery in Europe, with overweight positions in financials, telecoms and consumer discretionary stocks. In our view, this portfolio is well positioned to benefit from the nascent European recovery.
Nomura Global Dynamic Bond
Dickie Hodges (pictured) joined Nomura at the end of 2014, having previously run a similar strategy at Legal & General. He aims to produce a reasonable yield from the portfolio, but what differentiates it is the use of derivatives to remove any unwanted risks. With interest rates low, and with an upcoming rate rise cycle, we have allocated to a manager who has the tools to perform in all environments.
Biography
Nancy Curtin is CIO and head of investment management for Close Brothers Asset Management. Appointed in 2010, she oversees a team of 55 investment professionals. She has experience as managing partner, at Fortune, where she ran an alternatives investment business; Schroders, where she was head of global investments for its $20bn global mutual fund businesses; and Barings, where she was head of emerging markets.
