“We have a world awash with debt – and companies more leveraged than they have been in a long time. Some companies perhaps shouldn’t still exist.”
David Vickers, Brunel CIO, was speaking to a local government pension scheme and fund manager audience at an event organised by Room 151 at the London Stock Exchange, in the wake of COP 26. But he sees relative opportunities despite the debt dynamics and broadly lower returns.
“When I think about fixed income across the piece, there are lower spreads,” he said. “But with equities there is technically uncapped upside”
On inflation, he argued expectations were the key.
“Inflation isn’t a bad word – a moderately inflationary environment is productive for the functioning economy. The problems occur where the velocity is greater than has been priced in. At the moment a degree of inflation is priced into markets,” he said.
Responsible Investment (RI)
Speaking as COP 26 was drawing to a close, he was keen to emphasise that RI works best through collaboration.
“Strategic Asset Allocation (SAA) isn’t part of our mandate but you have to answer questions on it all the same. When it comes to Net Zero, the macro of SAA and the micro of stock selection have now met in the middle. People from the two sides need to be sitting around the same table.”
When it comes to the nitty gritty, though, he argued that it’s all about the data.
“Data management is everything – you need a decent and evolving system. We are trying to shape policy by talking to the FCA, the Treasury, the SASB, and then I sit on GFANZ [Mark Carney’s new body], and Faith Ward sits on a whole range of related committees and boards. She had many fruitful conversations in the Blue Zone at COP 26 – and we know there will be announcements soon. We have to keep improving the data.”