30 December 2019
After initially contemplating a legal career, Julian Howard became an investment writer. He joined GAM Investments in 2007, where he moved into investment management and is now Lead Investment Director of the London Multi-Asset Solutions team.
Julian is a big advocate of the US, both from a personal and a professional perspective. He was recently featured in Wealth Manager’s Top 100 for 2019, an annual analysis of the leading fund selectors across the UK and Channel Islands.
The finance sector thrives on change. Harking back to the invention of banks in fourteenth century Italy, financiers have constantly striven for innovation – that perpetual ‘next best thing.’ Julian Howard, a 20-year veteran of the industry, views this evolution as circular. Amid the rallying cries of cryptocurrency and big shorts, he believes that everything comes down to equities.
“Everything non-equity essentially deleverages a portfolio. There’s no shortcut. It’s as simple and complex as that.”
The simplicity lies in the instrument, in his view. An equity is perhaps the most basic building block of fund management, a claim on humanity’s ability to innovate and monetise. The complexity, on the other hand, comes at least in part from greed. When the global financial crisis reared its head in 2008, it revealed an insidious system of jargon-fuelled backdoor deals, stuffed with abstract instruments understood by a select few proprietors, says Julian.
Julian observes today’s “overreliance on exotic alternatives” as mystifying given their unreliability. “We came to the realisation that superior growth is mainly going to come from owning businesses. It wasn’t always like this. In the old days, there wasn’t a big distinction between balanced, growth and cautious approaches because everything worked most of the time – hedge funds and bonds generated returns consistently. Your asset allocation didn’t matter. Now, it arguably matters more than ever.”
As the Lead Investment Director for Multi-Asset Solutions at GAM in London, Julian has honed his ability to operate in a constantly shifting landscape. His career began at JP Morgan and included the firm’s rigorous training programme in New York. An initial period on the US Treasury trading desk preceded a move to the buy side. He recalls his initial view of America as being dynamic and diverse. In particular, the finance industry radiated an intensity that law, his first choice of career, simply lacked.
“As a lawyer you advise, but you tend not to live with the consequences of your advice. If you’re an investment manager, you’ve got to live with that. I wanted to see the consequences and feed that into better decision-making in the future. In that sense, finance is structured to be more rewarding.”
Despite their obvious differences, law and finance bear certain core similarities that Julian acknowledges. “Investment involves making a case. You’ve got to convince people all the time. You’re convincing clients and your fellow fund managers, you’re convincing sales teams, pitching constantly. Like the film, Glengarry Glen Ross. ‘Always Be Closing.’”
The film in question involves a clan of competitive real estate agents, each one battling for sales supremacy. Notably, each man utilises unique methods in order to achieve his goal. Julian laments the investment industry’s loss of individuality. “Hiring managers are unwilling to indulge a candidate that’s not ready-to-go,” he notes. “The younger guys view their education as a pre-qualification. As the industry has become more specialised and competition has become incredibly fierce, the result is a rising proportion of new entrants that have done nothing but economics or finance from the age of 18.”
However he believes there is definitely a case for those with different life experiences and qualifications to move into the investment industry. “British Airways, for example, hate taking on potential pilots who already have a private license. They want to teach them to fly their way, rather than bring in someone who’s already been doing it. Someone who hasn’t done investment before, who wants to get into it, can always learn how someplace like GAM does it, while still bringing something new to the table. We need to bring education into the scope of today’s diversity drive.”
Julian himself is a manifestation of this philosophy. A former student of history, he arrived at GAM in 2007 as an investment communications manager embedded within the Managed Portfolios investment team – a team whose lineage traced directly to the firm’s founding in 1983. He believes the dedicated role served as a reminder of the importance of communication, while admitting that it was an unusual first step towards his eventual fund manager role. “To become an investment manager out of marketing, IT / operations or indeed any other part of the business is almost unheard of now. That’s a great shame; these skillsets can bring a unique perspective, and the rest can be picked up through professional qualifications and experience.”
Where does Julian see investment opportunities? “We like everything US. In turbulent times, capital flows into America. The dollar is this dominant currency. America’s capital markets are the best in the world, with US management consistently scoring highly due to the Darwinian mindset.” Indeed, despite a controversial administration, the American economy has continued to grow – posting 3.1% annualised in the first quarter of 2019.
But he also highlights the 2009 book American Rust, by Philipp Meyer, a critically acclaimed novel depicting the marginalisation of the American working class. Set against the backdrop of post-industrialisation and globalisation in America, the storyline charts the countrywide depression associated with the so-called “New Gilded Age”. Julian summarises the Steinbeckian work as “a bit depressing.” Even considering the morose subject matter, he notes that, “ultimately, it communicates that there’s still hope for moderation and a sensible approach in the future. If we can correctly price globalisation, then everyone can benefit.”
From an investment perspective, he identifies the book’s analytical contrast between America’s well-managed corporations and the country’s social challenges. “It’s about how much America has changed. As a country, it remains hugely challenged in terms of employment participation, gun control, opioids and so on. And the book really encapsulates that.”
Still, Julian believes the US’s continued exceptionalism owes much to a consistently high quality of leadership across its economic institutions and boardrooms, allied to the primacy of the US dollar. In conclusion, he says, the good news is that the “best of America” is easily accessible to international investors via its vast, liquid capital markets.
British born and bred, Julian summarises his career to date as striving to understand the world better. Bearing this in mind, his approach to investing is very much international.
“The idea is to assess the outside world and make a decision on the back of it,” he explains. “When it goes right, it’s thrilling. Investment management is one of the best jobs in the world in the sense of that intellectual rigour, while the prize, generating returns for the client, is considerable.”
He embraces the theory that managing money requires less ongoing input than many in the industry would have you believe. As Bill Gates once said, referencing advice given to him by Warren Buffett: “Activity is not a proxy of your seriousness.”
Julian believes this is a good description of his own investment philosophy. The classic adage of ‘make your money work’ rings true, in his view, given that equities capture human progress. In Stocks for the Long Run, his investment hero Jeremy Siegel identified a 6.6% long term return as being intrinsic to equities. “It’s demanding intellectually to identify the ground rules of investing, but thereafter you shouldn’t overthink it.”
As he says, “It’s as simple and complex as that.”
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. Reference to a specific security is not a recommendation to buy or sell that security.