Feature – Equities


EQUITIES: A DIFFERENT PATH


Legends in investment management tend to be spun around contrarian investors, people who had the courage not to follow the herd and position themselves against the market. Michael Burry is one such investor whose courage to think differently has seen him immortalised on film. The Big Short portrayed the hedge fund manager’s decision in 2005 to make a $1bn (£774.7m) bet against the US housing market. The rest, as they say, is history.


In contrast, despite the media attention devoted to the invest- ment strategies of Warren Buffett, George Soros and Bill Ack- man, Hollywood is unlikely to spend tens of millions of dollars making a film about a pension scheme which invests all its assets passively at a reasonable management fee to replicate the performance of the MSCI Global index. Yet this is precisely what is on the minds of most pension scheme managers. Institutional investment can be boring, and most trustees and scheme executives are happy to be so. Their


44 | portfolio institutional October 2020 | issue 97


priorities are typically long-term returns, risk management and affordability, rather than dramatic out-performance and Hollywood status. But with stock markets becoming increas- ingly concentrated and volatility rising, could taking a stance against dominant market views sometimes become a safer bet?


Shrinking universe


Over the past two decades, stock markets in the developed world have become more concentrated in terms of the volume of new listings and which stocks are attracting the bulk of shareholders’ cash. While the number of listed companies globally has increased in the past few decades, it has fallen sharply in developed markets such as the US, Europe and the UK. In the US, the number of publically-traded firms has dropped from a peak in the mid-90s, when more than 8,000 firms were listed, to around 4,400 in 2018, according to the World Bank. Similarly, in the UK, the number of companies


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