If it worked for Manchester United, it can work for your fund manager. At least that is the belief of Fidelity multi-asset portfolio manager Bill McQuaker.

Legendary Red Devils manager Alex Ferguson’s philosophy of constant evolution and hunger for success worked because the truth is ‘last season was last season’, says McQuaker (pictured). He says fund managers cannot rely on good past performance any more than goalscorers.

The worst mistake is to stop learning altogether, like José Mourinho and Arsène Wenger, he says. ‘In José’s case, he came to think: “I have the answer, I am the special one, my toolbox is relevant for all times”. Turns out he’s wrong.’

McQuaker’s digression into the Premier League is prompted by his belief managers are facing ‘one of the most important years for financial markets’.

Positive goal difference

Coming out of a bumper year in 2017, McQuaker took a cautious approach, based on the premise that ‘when you’re sitting at the top of a hill, the only way is down’. This strategy, he believes, paid dividends during the sharp market downturn in the last quarter of 2018.

The Multi Asset Open range he runs alongside Ayesha Akbar outperformed the sector average across the board in the year to 31 January 2019, and the assets he brought on board to provide balance are still in place.

For instance, Fidelity’s Multi Asset Open Defensive fund was one of only 10 funds of the 156 tracked nationwide to show positive returns (0.2%) across the year, largely avoiding sharp downturns in October and December 2018 (see graph below).

McQuaker says: ‘I bought some more risk, but I didn’t sell any anti-risk. The most difficult decision individual investors make in today’s markets is deciding what sort of assets they’re going to own that will provide balance if things go wrong on riskier assets.’

With global economic growth slowing, McQuaker anticipates corporate credit, high-yield bonds and equities will fall in price. Although he increased the portfolio’s equity allocation in the fourth quarter, he still believes it holds slightly less equity than much of its peer group. McQuaker also took steps to mitigate threats to risk assets.

He adds: ‘That takes me to the hedging portfolio and to a set of assets that includes a bit of cash, not huge amounts, gold, gold equity, volatility, because you can buy volatility, and the Japanese yen. There are also some government bonds focused on areas such as the US and emerging markets where real rates are higher.

‘My judgment is, if we get into trouble, that basket of assets will go up in price, and that will offset the pain.’

Squeaky bum time

McQuaker believes the current critical juncture for markets hinges on the level of conviction with which the US Federal Reserve and China act to stabilise and reflate the economy to avoid a market correction.

He adds: ‘I worry the most important central bank in the world is still at the margin in tightening mode. Other central banks, the European Central Bank, the Bank of England, the Bank of Japan, are all on neutral. The big economy that’s easing is China, but it’s certainly not with full conviction.’

McQuaker cites PineBridge Investments in Japan: ‘It’s a small-cap growth manager; I don’t think it is at all well known here in the UK,’ he says.

‘The woman who manages the fund only speaks Japanese, but we have an analyst in Tokyo who is Japanese and has brought that strategy to us as one that he really likes. My suspicion is that few if any of my peers will have exposure to that manager and her portfolio.’

Fidelity plans to merge five multi-asset funds housing £2 billion of assets into the £884 million Multi Asset Open range run by McQuaker and Akbar in March, following a move from a ‘fund of funds’ to a ‘manager of managers’ approach last year.