SPECIALIST GLOBAL FIXED INTEREST MANAGERS
In our series of fund manager profiles, we spoke to Edinburgh-based Cameron Hume on their recent trip to Australia. Cameron Hume is a specialist, global fixed income investment management firm founded in 2011. Its two principles, Guy Cameron and Chris Torkington, have long careers working with firms such as with Baillee Gifford, Barclays, Standard Life and Scottish Widows and established their own firm to specialise in active, institutional fixed income investing and to focus on building long-term relationships with clients. John Donovan, who works with locally-based AFM Investment Partners, has been working with Cameron Hume to introduce the fund to Australian investors and arranged our meeting.
YR: Guy and Chris, welcome back to Australia. Can you tell our readers a little about Cameron Hume?
CH: Thank you, it’s a pleasure to be here again. Cameron Hume are active managers with a fundamental outlook; we have an investment horizon of 1 to 3 years. We look for active returns through positions in global rates, inflation, currencies and credit, which are overlaid on the underlying assets determined by our clients’ choice of benchmark. The active positions are drawn from a global universe where we can seek out the best ideas and we manage the positions as single coherent portfolio. These active positions are overlaid on a portfolio of assets that replicate the client benchmark and so, in this sense, we are benchmark agnostic.
Each client’s portfolio will consist of the benchmark replicating portfolio, which may be unique to them, and an active portfolio that will as far as possible be common to all clients. The active portfolio aims to target an agreed return above our client’s chosen benchmark. This may be scaled up or down based on client objectives and risk appetite. This approach ensures that all of our clients benefit from our best ideas.
YR: Why have you chosen to be active managers versus being a passive manager?
CH: We track many different investment ideas from a global universe and select what we think are the best ones. The best way to express an investment view often means finding a way to isolate that view from extraneous influences: active global investing allows us to do this.
YR: What is your investment universe and how do you screen your investments?
CH: We have a global outlook and as such trade positions in corporate and government bonds, inflation linked bonds, emerging markets bonds, supra-national bonds, credit swap contracts, futures and forwards, currency contracts and other instruments present in the particular benchmarks selected by our clients. We don’t use screens as such but consider qualitative and quantitative criteria on a case-by-case basis.
YR: Can you tell us some of the specific themes you are looking at in 2016?
CH: We continually analyse multiple global economic themes. One such view in which we retain strong conviction is: Europe – reflation divergence. The European economic cycle has fragmented since 2012. The UK cycle is advanced with low unemployment and modest wage growth, whereas Sweden has ‘sticky’ unemployment and headwinds to wage growth. The Eurozone on the other hand continues to experience very high unemployment and low growth, particularly in France and Italy. This necessitates exceptional monetary stimulus for some time to come.
As a consequence of this we expect:
- The Swedish yield curve to ‘steepen’ as realised inflation is allowed to modestly overshoot target whilst official policy rates remain negative.
- The spread between 1y rates, forward dated, in the UK and Eurozone to widen as the respective economic cycles lead to diverging realised inflation over the next few years.
Our fund also believes that “term premia” will return in US Treasuries. Term premia, or the return investors demand to compensate them for holding longer dated bonds, has been crushed and we think the risk is the US will do better and that the yield curve may steepen sharply.
YR: Why should investors should place money with Cameron Hume?
CH: Our business proposition is to work with people who already own fixed income. It is not our intention to sell the asset class; rather to add value to our clients’ portfolios through active management. We value building long-term relationships with institutional investors with whom we can engage in a meaningful dialogue about their portfolios.
YR: We can see where the name Cameron comes from but what about the name ‘Hume’ in Cameron Hume?
CH: There’s a story behind that. Guy set up a limited company before Chris joined and felt that the firm name should have two names. Not having a partner initially, he chose the surname of the Scottish enlightenment philosopher David Hume as it was his tri-centennial. Shortly after when Chris joined, Guy offered to change the name, but they both felt that Cameron Hume was a good name with strong roots to Scotland, so it stuck.
For more information about Cameron Hume please contact: John Donovan at AFM Investment Partners on +61 3 9639 9711 or Cameron Hume