From the Big Ben to Big Apple and Beyond: Research trip insights

In February 2023, Anthony Ballard (General Manager, Research) and Michael Mulcahy (Principal Consultant) undertook a multi-asset class research trip. The trip spanned approximately two and a half weeks where they visited close to 30 firms in London, Rotterdam, New York, Chicago, Milwaukee and Los Angeles.

The core purpose of the trip was to explore risks and opportunities across the investment spectrum and included meeting with incumbent managers in client portfolios and prospective ideas. A cross-asset class trip is particularly insightful in this regard as it affords the ability to contrast and consider the relative risk/reward set, across asset classes and down the capital structure, in real-time. We identified a range of opportunities, but generally found the most interesting ideas in the ‘mid-risk’ space, including some that are quite differentiated and likely to be of interest to clients.

Some key high-level takeaways were as follows:

1. Despite the backdrop of rapidly rising interest rates and high inflation, the observed economic activity showed minimal signs of a slowdown. This was most notable in London and New York; both of which were unseasonably busy and expensive. Rates/inflation appear yet to take a bite out of the consumer, which may increase the likelihood of further central bank hikes.
2. Most investment managers we met with noted they had recently moved or were planning to do so, and highlighted material vacancy rates in their buildings. This provided some warning signs against the significant amount of commercial building activity observable in London and New York and it was perhaps unsurprising that a clear area of concern for many investment managers was the Commercial Office property market in the US. Other areas of property, however, appear to provide quite attractive risk/reward, including Single Family Rental (SFR) housing dynamics.
3. Credit managers are seeing the opportunity set as attractive, especially in a relative sense where risk/reward against equities appears favourable with High Yield bonds expected to provide similar returns. There are, however, some more attractive pockets of the credit market than others and manager selection will be important, especially if defaults were to rise meaningfully from very low levels. The Securitised segment looks interesting with one eye to a future where defaults rise (for example related to the office sector or as a flow on from current banking issues), for investors that are willing to extend some of their illiquidity budget.
4. We discussed Sustainability issues extensively and it is clear that managers are looking for ways to continue to evolve and bolster their credentials in the space. We did note a relatively pragmatic tone coming from European investors, perhaps coming on the back of the realities of living through the recent energy crisis. It will be interesting to continue to watch developments in this regard.

Overall, an insightful research trip which has already led to further discussion points with research teams.

This was the 7th global research trip JANA personnel have undertaken in the past six months, totalling approximately 22 weeks offshore in that time. JANA’s research teams currently have a further eight global trips already booked through to the end of August 2023.

While ‘boots on the ground’ global research carries an increased level of cost and inconvenience in a COVID-normal world, our commitment to a global research programme remains steadfast. Our commitment enables us to exercise our own high standards of due diligence in a consistent manner, which drives differentiated insights and allows for the compounding of knowledge over time. The application of these global insights through a local lens remains core to JANA’s value proposition and is something that ultimately has a unique fingerprint on client outcomes.