'Trading right now is much more difficult and much more expensive'

Thursday 30 April 2020

CFA UK Insights

Author:Joanne Frearson

When it comes to reporting fund performance, getting a good valuation for unlisted assets has been tough for asset owners. 

The recent volatile market conditions and liquidity challenges have made trading increasingly difficult and it has been hard for them to know what investment strategy they should take. 


How asset owners are assessing strategy

Graham Cook, CFA, Strategic Investment Manager at the Environment Agency Pension Fund, says: “There is a lot of volatility, so just getting a good steer as to where your assets are is quite difficult on a day-to-day basis.

“Assessing whether your current investment strategy is the right one is not very easy in the very sort of foggy waters that we are sailing through right now.”

Cook who is also Vice Chair of the CFA UK Board thinks trading should only be done if there is a really good reason. There are a lot of liquidity challenges and “trading right now is much more difficult and much more expensive,” he says. 

“We don’t anticipate making any changes in the immediate future to our portfolio until we get a clear idea of where valuations settle down.” 

Buying unlisted assets 

However, Cook believes private markets can provide a very attractive source of return if you don’t need liquidity. 

“What you might find is people have a really deep look at what their need for liquidity is and how much can actually be locked up in unlisted assets,” he says. 

Although in order to get the return in private markets, he points out investors need to be locked in on a project for a decade or longer. 

The crisis is reinforcing a move into sustainability

Since the pandemic emerged Cook, also thinks there will be a larger focus on sustainability notably due to factors such as as air quality improvement and carbon emissions reduction. 

“We need to think about ways we can maintain that,” says Cook. “We have all realised how vulnerable we are.”

One thing that has become clearer as a result of the crisis, explains Cook is that companies that have sustainable working practices will have a better chance of coming out the other end in good shape.

To find out more about these issues, here are the key areas to watch [timestamp in brackets]:

How asset owners are assessing strategy [0:00-2:32]
Buying unlisted assets which are less liquid [2:32-3:42]
The crisis is reinforcing a move into sustainability [3:42:5:21]

This video was recorded over Zoom on Sunday 26th April. 


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