Boutiques Connect News | 20th April 2023

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  • 02 mins 30 secs

Learning: Unstructured

In this Boutiques Connect News update, Lisa Gordon joins Fulcrum Asset Management and Seilern Funds outline their definition of quality growth in the wake of the recent banking crisis and Chelverton Asset Management makes the case for European large caps.
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Hello, I'm Rory Palmer and welcome to this boutique Connect Update on Asset TV. Making the headlines Lisa Gordon joins Faul from asset management and silo funds outline their definition of quality growth in the wake of the recent banking crisis. First, though, Shelton Asset Management has been making the case for European large caps, not least because these are where the banks are.

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Fund manager Dale Robertson described those banks as an investment graveyard for most of the last 15 years. From their peak in 2006 to early 2021 75% underperformed the index. Robertson said, though, that the market has forgotten these companies can make quite decent returns in a more normal interest rate environment.

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After more than a decade of balance sheet repair, he said banks faced the economy in the rudest health in decades.

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Next up, while Robertson is particularly bullish on the banking sector after the collapse of Silicon Valley Bank and the rescue of Credit Suisse, Marco Le Blanco of silo funds has outlined why banking as a sector doesn't pass its quality growth metrics. Our bank makes money by borrowing short from deposits and lending long by making loans, hoping to make a larger spread as possible, he said. Therefore, it's completely bound by the cyclical gyrations of the yield curve, which means it has very little pricing power.

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Future cash flows are also derived from the value of its loan book and on the balance sheet and notoriously difficult to assess. This reduces the transparency of those banking accounts. Le Blanco added that when financial stresses do arise, this reduced transparency alongside a highly leveraged business model can lead to incredibly fast bankruptcies. Quality growth, he concluded, though, is focused on investing in industries with secular growth rather than cyclical growth.

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Finally, Lisa Gordon has joined Fulcrum Asset Management as a non executive director. She has over 25 years of board experience incorporating both executive and non executive roles. Gordon will provide independent oversight of the company's management and corporate governance, as well as offering additional guidance and strategic direction to the company's executive team.

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Well, thanks as always for watching this update, I'll see you here next time

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