‘In a good month we have a 55pc success rate’

With hundreds of options to choose from, it can be difficult for private investors to differentiate between the global funds on offer. Some of these portfolios owe much of their success to the stellar performance of big tech stocks, so it can be hard to tell the funds being managed well from those riding the coat tails of a single successful sector.

But Ian Heslop, who co-manages the £1bn Old Mutual Global Equity fund, believes that investors can find dramatically different investing styles across the market.

He tells Telegraph Money why it is foolish for fund managers to try to predict interest rate rises and their effect on the market, and how his investing strategy has changed.

The problem with active funds is that many struggle to beat indices consistently. We look for consistency in our return and this means our clients are typically of two kinds. The first are smaller clients who just want global exposure. We have a lot of diversification, and that’s very attractive to these investors. The second are larger clients who want two or three global funds in a portfolio. They tend to use us to diversify their global equity exposure.

Old Mutual’s Ian Heslop tells Adam Williams how he is responding to investors’ increasing caution

We think more about themes and styles than individual stocks, recognising that nothing works all the time. We have no big country or sector positions. That’s different from other global funds.

The real trap for those who want consistent performance is concentrating into one type of stock. “Quality” stocks have overperformed for an extended period and value stocks have underperformed, but it’s not usual to have such consistency from one style.

CV: Ian Heslop

Before he e joined Old Mutual ual in 2000, Mr Heslop was as a fund manager nager at Barclays ys Global Investors. . He is from South We don’t spend time trying to forecast interest rates, GDP, oil prices or anything like that. There is an Achilles’ heel to using that data.

The problem, now more than ever, is that there are two separate forecasts you make when you look at something like interest rates. You need to forecast the rate itself and then you have to forecast the impact of that rate on the assets you invest in. That secondary forecast is almost impossible to get right consistently.

Instead we measure how the market is behaving and how economic, geopolitical and company-level information is affecting the market. The market is very different from how it was in 2017. Last year, we had low volatility and markets were generally rising, but even then more “defensive” stocks were being bought. Risk appetite is continuing to fall and volatility is going up.

So we now place less importance on whether a stock is cheap or expensive: we are looking for quality. For example, in a stable market when everyone is making money, people don’t care whether management is good, bad or indifferent. When markets become unstable, as they have over the past 12 months, it becomes more relevant.

We would normally expect in a good month to have 55pc of the positions right and 45pc wrong. In a bad month we’d have 45pc right and 55pc wrong. Those are the percentages

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