Futureproofing fixed income investments

185 | Futureproofing fixed income investments

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Tutors:

  • Bryn Jones, Head of Fixed Income, Rathbones
  • Noelle Cazalis, Fund Manager, Rathbones
  • Kate Elliot, Head of Ethical, Sustainable and Impact Research, Rathbone Greenbank

Learning outcomes:

  1. The future role of fixed income in a client portfolio
  2. What the last 20 years can teach investors about fixed income’s characteristics
  3. The major challenges for bond investors in the decade ahead

Rathbone Ethical Bond Fund

Channel

Akademia
Note: The following is the output of transcribing from a recording. Although the transcription is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages. It is posted as an aid to understanding the recording , but should not be treated as an authoritative record. PRESENTER: Hello and welcome to Akademia. In this learning unit, we are focusing on how you can future proof your fixed income investments in the years to come. To discuss that, I’m going to be joined in the studio by Bryn Jones, Head of Fixed Income at Rathbone, and by Noelle Cazalis, she’s fund manager at Rathbone - between them they are responsible for the Rathbone Ethical Bond Fund - and we’re also joined by Kate Elliot, head of Ethical Sustainable and Impact Research at Rathbone Greenbank Investments. Bring them in at the second but first of all let’s look at the learning outcomes. They are: looking at the future role of fixed income in a client portfolio; what the last 20 years can teach investors about fixed incomes characteristics; and what the major challenges for bond investors are in the decade ahead. Bryn, what would you say the main themes to consider for what’s going to make a bond fund fit for purpose for the next 20 years? BRYN JONES: Well, the bond funds we’ve been managing over the last 20 years have been through lots of different volatile periods, both rates and credit, and I think one of the most important things right now is that after very, well nearly five years of very low yields, we’re now seeing nominal yields which are a lot higher. And of course if you compound higher yields over long periods of time, they do give you good returns, for example 7% compounded over 10 years gives you 100% return. And so whilst in the short term we’re seeing inflation pressures, we have to remember that inflation is an annual figure. And at some point over the next 12 months it’s expected that inflation will drop again. And having portfolio insurance in your portfolio in the form of fixed income I think it’s important. You know, over the last 20 years we’ve seen periods where having fixed income in your portfolio is quite important. That kind of inverse correlation might start to come back where risk assets start to fall like equities and you can get a decent positive yield, nominal yield from your fixed income portfolio. So I think that’s quite important now looking forward over the next sort of five, 10 years, at least, but having some fixed income in your portfolio right now is actually not all bad place to have some defensive asset allocation. PRESENTER: Thank you. Noelle, what are your thoughts on what some of these key drivers of bond markets going to be over the next 10, 20 years and are they the same as the drivers we’ve seen over the last 10 and 20 years? NOELLE CAZALIS: Well I guess following on from Bryn’s comment, income is going to be very important I think. It kind of had disappeared for a while, now we’re seeing better yield on offer. But also if you think about demographic and ageing population, people need that income at retirement, so I think that’s going to also be a big driver of the monthly ones. And I guess another theme for the next 10 or 20 years would be sustainability and climate change and the energy transition so I think in terms of sector splits and the sectors are important to the economy, we’re going to see a lot of changes, and it’s important for us to think about it and position accordingly. PRESENTER: Thank you. Now, Kate, you’re head of ethical, sustainable and impact research at Rathbone Greenbank Investments. First of all, can you tell us how Greenbank differs from Rathbone and the team running the fund? KATE ELLIOT: Absolutely so Rathbone Greenbank were the specialist ethical and sustainable investment division within Rathbone, so we manage bespoke portfolios for individuals, either individuals or charities. All of those that are managed within Greenbank are managed according to a specific set of ethical or sustainability criteria, and because of that we’ve built up a deep understanding over the 25-plus years that we’ve been in operation of how these ethical and sustainability factors impact across onto investment returns. Within the research team, we conduct analysis into organisations, and that’s where we provide services to the ethical bond fund, where since inception my team has been working to ensure that everything that is held within the fund meets the ethical criteria and adheres to both the negative exclusions but also importantly some of those positive areas that we want to see reflected in the fund. And that absolutely goes back to what Noelle was just talking about, how those sustainability trends we see as drivers of future performance, some of the elements that we want to see and kind of look for within the companies that we invest in within the fund. PRESENTER: And just on that point of ethical sustainability impact, I mean there’s more and more terminology coming up, and the existing terminology, what it means seems to flex and change over time as well. So just on that, what do you think some of the main trends are that are coming down the line that we should be keeping an eye out for, for the next, I would say 10 or 20 years, maybe not that far out? KATE ELLIOT: I think if we think about sustainability, within Greenbank we look at eight sustainable development themes, and they cover climate change, as Noelle has mentioned, obviously one of the really critical issues, but also a lot of social issues as well. So we look at things like inclusive economies. We look at healthcare, nutrition, all the things that together really underpin what a sustainable world looks like. Because really thinking about these in isolation doesn’t make sense. We can solve climate change, but there is this concept of a just transition, where we need to make sure that in that decarbonisation pathway, we’re also making sure that we’re not leaving behind the poorest sectors of society. Within the ethical bond fund, that’s something that we reflect particularly when we’re looking at some of the social housing holdings, so ensuring that standards of social, social standards are being upheld in terms of tenant wellbeing, property quality but also that those providers are looking at looking at things like energy efficiency across the housing stock. PRESENTER: And Noelle, in terms of the sterling credit market, do you think it’s going to be as important in the future as it has been in the past? Other economies are coming on, other markets are growing. NOELLE CAZALIS: That’s a very difficult question. I mean of course the euro and dollar markets are more liquid, but I think if I think about issuers, they want to have diversified exposure to investors, so sterling could still have a place. And when I think about sustainable bonds in particular and especially green and social bonds I think the sterling market has been lagging a little bit. We haven’t seen that much issuance. I was hoping that cop would be a good driver to push issuers through the market. It hasn’t really happened yet because we’ve had difficult credit markets over the last few months, but I think when that comes on perhaps the selling market could have a little bit of a push in that area and that could be very interesting. PRESENTER: You were saying there that yields are higher than they were and prices are further down but that doesn’t mean they couldn’t fall further. Have you got, I mean there’s been a lot of talk ever since the global financial crisis that everyone keeps predicting the end of the great bond bull market, do you think it is over now, are we at an inflection point? BRYN JONES: We could see more periods of falling prices, we could see higher yields, but let’s not forget a couple of other things about fixed income is that you get what’s called carry, so now you’re getting quite a bigger buffer. For example in emerging market, the spreads at 400 and treasury yields at 300 over, or 3%, you’re getting a 7% yield. You know, that protects you somewhat. If the duration of that market is say five, then yields could rise another 100 basis points and you’d still make a positive nominal return, so we have to remember that that carry now protects us a little bit. And also roll down, because if you’ve got curves that can roll down as in you’re buying a very short duration asset on a 2 or 3% yield and you can buy a 10-year asset on a 5% yield, each year you hold that bond, the yield falls, the price goes up as well. So we are now getting some protection from carry and roll down and I think that’s important to remember as well. And there’s another thing that’s really interesting which is a bit geeky in the fixed income market which is convexity. And what’s happened is because some of these bonds have very low coupons, for example you take a very long dated British or American tobacco bond, it’s now trading around 50p because of the impact of the duration. Well, some of these bonds now are trading below their recovery price. So, even if these bonds defaulted, you would get more money back than what they’re currently priced. And so there is this really interesting perspective that everyone’s worried about the level of defaults or potential yields rising, in actual fact if you hold that asset for five years, you’re going to get a decent return from it anyway. So, unless we get a complete blowout in spreads or a complete rise in government bond yields by another 4% in the next 12 months, I think you’re going to get well protected from holding fixed income which naturally gives you some cushion to rising yields. PRESENTER: So, just going back to the example BAT, so what you’re saying is if you could buy a bond at let’s call it £50 and its nominal value is a £100, even if BAT went bust, you’d probably get £70 over your £100 back for example. BRYN JONES: Yes. I mean I don’t know the specifics of that BAT, but in general some of these bonds now are trading below their recovery rate which, yes, will throw up a certain about of value. Because if you think about it, if you are pricing in the worse case scenario, you don’t really want to be holding the equity because it will have bottomed the capital stat. If you’re in a bond, a senior bond that’s going to pay you back more than you paid for it, it kind of becomes almost as a not a free trade but gives you a great opportunity to buy an asset at a very low price. PRESENTER: Well, Noelle, on that point, because we hear so much about the world as in being transformed and changing and, you know, the big companies today are not the big companies of tomorrow. What historically has happened when you get a really large company that’s got a lot of debt and, you know, the business model goes wrong, new things come through, what typically happens to the bond holders? NOELLE CAZALIS: Well I guess you have, when there is big changes, you have different types of companies. The one that they are going to adapt and change their business model and the ones that are not. So then in terms of recovery and if the bond defaults, it would depend on the company specific and the assets. But, you know, the way we are looking at the world is trying to avoid exposure to these businesses, because it’s very hard to estimate a recovery value of an asset that we don’t know how much is going to be worth. And one good example at the moment is thinking about energy companies and the potential of stranded assets there, how do you value that if someone if no one wants exposure to these assets? It’s very difficult. And I guess yes for us it’s more about avoiding this company because it would just depend who steps in. You might have some, I don’t know, private offices stepping in and thinking that these assets are worth something. But equally you can have a lot of losses that are imposed on the creditors, bond holders but also banks. So what we’ve been doing over the last couple of years has been to reduce exposure to banks that have high exposure to fossil fuel financing because we don’t know the value of these assets and how much they’re going to be worth and what kind of losses are going to come through to the banks themselves. PRESENTER: How easy is it to work out where banks have got all of their exposures? Because one argument certainly back from the global financial crisis was everyone said oh my god we had no idea what they were doing, banks are incredibly opaque. A lot of managers came out and said on the back of that we’ll never invest in them. NOELLE CAZALIS: Yes but I think since the financial crisis, a lot of regulations have kind of been imposed and transparency is better. Of course it’s not as granular as we would like it to be but the transparency is much better from banks. It’s a lot more reporting that is available to investors. And a lot of NGOs are also doing work on that to ensure that we know where the exposure is. KATE ELLIOT: And I think just to add to that, I think it’s all of the benefits of having an in-house research team. So we’re not relying on kind of third party taste points that we might buy in, we don’t understand the methodology of it. Of course that forms part of our analysis, but we’re also as Noelle said looking at kind of news flow analysis. We’re looking at information put out by the companies themselves. We’re having meetings with organisations so that we can kind of discuss inconsistencies in the data, we can discuss where one of their peers might be reporting something that one company isn’t, and we are also drawing on reports from NGO networks, relationships that we’ve built up over years at Greenbank where again we can understand the kind of relative credibility of all of these different information sources, blend them all together so that we have a really truly detailed and holistic understanding of sustainability risks and opportunities. Because that really is an additional lens through which we can assess organisations, climate change being the most kind of obvious example of that, but across all of these different sustainability factors, each one of those could present kind of systemic risks or kind of individual risks to a particular organisation but also significant opportunities over the long term. PRESENTER: Again, with more and more computing power, and all of these more and more sophisticated models, how do you resource all of this, is this a question buying a bigger laptop or is it about employing more people and data scientists, how do you see that whole side of the industry developing over the next few years? KATE ELLIOT: It’s a little bit of everything. I think data is increasing and is improving in terms of the availability and the quality of that data. But I don’t think you can ever underplay the importance of humans in that. Because particularly when we’re thinking about social issues, a lot of that can’t neatly be quantified down to data points; there’s still an incredible amount of qualitative analysis that goes into understanding how exposed to human rights risks as an organisation, how well is that organisation managing those potential risks, that doesn’t fit neatly into a spreadsheet in the same way that kind of certain environmental data points might do. So for us it’s about ensuring that we have good quality data flows but also that we have a good quality team who has the experience, has the understanding of the nuances and is about to cut through the greenwash that we do see in some areas of the market. PRESENTER: But pulling all of that together, down the line does that mean clients are going to paying more for asset management in the round because you’re not just paying for the person that ran the money and used to think about shareholder value, you’re now paying for all the people who have to think about wider set of values and double check everybody’s doing it? KATE ELLIOT: I don’t think it should necessarily mean that clients would pay more for it and I think, I mean in the broadest possible way, that’s one of the most persistent myths around ethical and sustainable investing is that there is a financial penalty to pay for that, and I think that’s been roundly disproven by hundreds if not thousands of academic studies. And I think what you’ll find is that as ESG and sustainable investing becomes more the mainstream, that these costs are just seen as a necessary burden for the institutions themselves, increasingly they’ll become regulatory requirements for all of those different asset managers to meet, so it all just be seen in the same way that an investment house is required to have a team of investment analysts. They will need to have ESG expertise, sustainability expertise in-house as well. PRESENTER: OK. Bryn? BRYN JONES: Yes the other point to note is that from a regulatory perspective, more companies are going to be forced to report on all these metrics, and there’s going to be some sort of standardisation almost like counting US gaps like stuff over the next five, 10 years, already seeing in the next year or so, all companies in the UK are going to have to report on various metrics. So that actually will make it easier for people to analyse. So therefore the costs of that will come down. And that adds to the point about the ethical or sustainable overlays creating extra costs, they also create huge benefits. You only have to look at the performance of the ethical bond fund since its launch 20 years ago. And it’s outperformed significantly, all of its peers, in a sector which has not been using ethical and sustainable investing. Maybe in the last five years we’ve seen exponential growth of that kind of research. So arguably there’s two points there: one is it’s going to become a lot easier and secondly your investment return outweighs the cost. PRESENTER: If there is a higher… BRYN JONES: Correct. PRESENTER: OK well one thing I wanted to move on because we touched around it a couple of times is around this whole issue of climate change. So, again, Bryn just as a theme, how important do you think, I suppose what we could call the Anthropocene is going to be as you look at markets over years to come. And a lot of people talked about it as a long-term thing, but when’s the point where the day-to-day world actually starts to bump up against that in the short-term and the long-term collide? BRYN JONES: I mean it’s explaining what the Anthropocene is, it’s proposed geologic age at some point in the 50,000 from today we’ll look back and we can see that we’ve had a big impact on the environment, whether it be from the amount of chicken bones in the ground to the changes we’ve had in the environment, the ways that we’ve been farming, all these factors will come into play. And I think the Anthropocene is not just limited to climate change, we’re seeing it pretty much everywhere. I read a report over the weekend that India is now banning wheat exports. You know, so this is kind of all these stories that we talked about are playing out: climate change, resource depletion, people protecting their resources. Perhaps there’d be situations where I’ve heard arguments in the past where on The Ganges, for example, they’ll dam water and won’t allow it into the other countries, it’s that, it could get that aggressive. So let’s not just limit it to climate change. But climate change is obviously at the forefront of the kind of Anthropocene story about how we’re having a huge impact. And one of the things I remember when I was growing up was my dad saying will we ever make it through the North West Passage in the Arctic in a boat, and it was always considered to be impossible and now you can your yacht through it. And so, not that we’ve all got yachts but I mean if you had a yacht you could, and I think that’s important. So I think the ways that we can at least slow that down or possibly reverse that are going to be seen as good investments over the next 20, 30 years. You know, the sustainability of your investment return as a bond investor is about long-term investing and, if businesses are going to be made to increase their cost of capital because they are damaging environment, those businesses are going to be effectively the ones that are going to come under pressure, as those that are cost of capital’s being reduced both by demand, let’s not forget about demand/supply economics here, and that will force the cost of capital down, or make those investments much more secure, sustainable, utility like going over the next 20 years. PRESENTER: And Noelle, just taking that, a big idea like the Anthropocene, how do you then express it in the portfolio today, have you got an example of things you would invest in and perhaps as importantly things that you wouldn’t invest in? NOELLE CAZALIS: Yes and I think it’s really important to look at both sides of the equation, the one that we should avoid and the one that we should focus more time on and look for more opportunities. So I guess once we have a big theme like that, we would look at sectors that would be beneficiaries and the ones that would be negatively impacted. And I think when you think a big issue like climate change and natural catastrophes, that could, results from that, it’s really important when we do a credit walk to look at the sustainability of cashflows. Because at the end of the day as one investor has really asymmetric risk and return, best case we get all our coupons and our money back, but worst case we get the same downside as an equity, hundred percent. So we really need to make sure the businesses are diversified. We need to also make sure that the cashflow that’s sustainable and they’re not at risk. And if the business is at risk then we need to understand do they have any kind of insurance. Because really the cashflows are king, I would say. So that would be, yes make sure we understand that. And in terms of beneficiaries, there are a lot of sectors that are developing very quickly, things like renewable energies. For many years I remember when I started in 2011, there were quite a few deals, but the cashflow was just modelled on very old model with very little data that were backing it. I think we’ve moved a long way from that, so now we find more and more opportunities to help that transition to a more sustainable economy. BRYN JONES: Yes I mean on that point I mean we’re now buying business, we’ve got a business producing power from wind energy which is already built, we’ve got cashflow, we’ve got sight of the cashflow, we can see what that business is being able to achieve. We’ve got businesses that are chucking out cash from solar energy. It’s those kind of businesses where they’re beyond the growth phase. So that was always, as Noelle said, was always very much we were looking at businesses and there was a possibility they could fail. And that’s the key risk with bond investor because our downside is hundred percent whereas our upside is only the yield effectively. And so we’re now moving into investments now where there is strong cashflow that we can see that fit into the Anthropocene, social housing. We’ve invested in education. We’ve invested in renewables. We’ve invested in businesses in the US, nature conservancy, for example, and so we’ve found a lot of deals where there is cashflow and I think taking Noelle’s point and putting it into specifics is becoming much much easier to do these days. PRESENTER: Kate, your thoughts. KATE ELLIOT: Just to pick up the point between the long-term and short-term nature of a lot of this, because we know that these are transitions that are going to take kind of decades to occur. We know that change at that level and at that scale cannot happen overnight, but what we’re concerned about is a kind of sense that because we know there’s a net zero by 2050 or sooner, that a lot of companies and investors might simply be thinking well we don’t need to think about this until 2045. So what we think is very important is that we look at what those short-term targets that are in place to put us on the right journey to make sure that with each of these transitions, whether that be moving to a low carbon economy, moving to a circular economy where we’re much more sensible about the way in which we use the world’s resources, that that is structured and that that companies have proper plans, investors are aware of the risks and opportunities, and we avoid the potential for shocks to the system that if we do need to see that change happen at a much more rapid pace, companies are not prepared, they don’t have the infrastructure in place, as Noelle mentioned we’ve got this potential of stranded assets where money has been invested in projects or initiatives that will never come to fruition, will never be profitable. So for us it’s about understanding how long-term goals translate into short-term actions. PRESENTER: You mentioned the circular economy, how are fund managers going to make money, how does capitalism make money out of a circular economy, because if you think, I mean I make an example but we’re always being encouraged to buy more stuff and if it doesn’t quite work, throw it away and buy a new thing, I mean that’s pretty common I think for all of us in the experience. If you basically say oh you’ve got to make do and mend it, it seems to me that if you’re a repair man, you’re going to do very well, but if you make washing machines, you might not. And presumably as asset managers, you’re probably more likely to lend money to Bosch than you are to, I don’t know, a guy in northwest London that repairs washing machines. KATE ELLIOT: Well one of the big trends that we see just as an example within circular economy is this shift from products to services. So you don’t necessarily buy a lightbulb, you pay a subscription for the service of lighting, and that has the benefit that all of the kind of repair, the maintenance costs are built into that. And it places the emphasis from kind of built-in obsolescence so manufacturers being incentivised to have a kind of short lifespan on their products so that they can sell more, to designing products that will last for a long time, that are modular, so that as upgrades need to be made, they can kind of be done without the replacement of an entire unit, and really kind of building in circularity from the design stage, and we see that, I mean you kind of, one example that people are probably really familiar with is a shift from car ownership to leasing where a lot of people take it for that convenience. But again that places a kind of shifts the cost-benefit for manufacturers to make sure that these are cars that will have a long lifespan so that when they might reach the end of the leasing period, they’ve got a strong resell value that they can be easily repaired and maintained. PRESENTER: Noelle, when you’re talking with companies that you’re thinking of investing with or lending money to, how do you approach say a topic like the circular economy with them, how do you get them to work out what their thoughts are about it, how it might affect their business model, or even threaten it? NOELLE CAZALIS: I was just going to add something actually on Kate’s point which is, it’s very different for a bond holder as an equity holders. We don’t need a company to make ROE of 10 or 12%. We actually invest in a lot of businesses that are not for profit, like social housing for example. And because we rank higher up in the capital structure, we don’t need this kind of return to service our coupons and our debts and for our investment to perform. So I think it’s a slightly different conversation that we would have and equity holders would have, because for them of course their return would really depend on ROE; for us, not so much. So it’s not really, I think for us what is more key than the actual profit levels is understanding the volatility of cashflow and how sustainable these cashflows are, and it’s been very important in COVID times for example where suddenly revenue’s dropped by 90% for some of the businesses. So really understanding the financial flexibility that they been in their business model, the kind of debt that they have that they can draw upon if something happens, the cash that they have in balance sheets. So I think it’s a slightly different conversation. So we would look at big themes and how they influence more the cashflow than the actual level of profitability. Of course they have very interesting sustainable business models that we look at. And when we look at cashflows, I mean it’s just a disaster. So we do need a certain level of profitability but it’s not the key driver of why we would invest in a company I would say. BRYN JONES: And yes I’d say that even further. So when we’re looking at social housing we’ve got some elderly care homes. And if the reports for these homes are very poor, because they’re not redeveloping or putting new lightbulbs in, then what happens is you get voids. And people don’t turn up, they get a bad report. You look at things like Bupa for example, you know, if Bupa have care homes and they’re all very poor, that’s going to be really bad for them because then people don’t want to go and stay or put their parents in there or other care. So I think, just looking at that and taking it a step further is that again talking about supply and demand, if you have a situation where you’re creating a situation where there isn’t a circular economy and a business that we’re investing in, it could affect demand. And in which case, you know, that’s a negative impact on the cashflows. So I do think there are kind of nuanced ways where it impacts the cashflow and it’s important in some cases to have that circular economy within the businesses that we’re investing in. PRESENTER: Just a quick final point on that, because you all mentioned a couple of times this important of providing capital for social good as well. How much time do you go around spending, making sure that it’s genuinely providing that because if you take in terms of care provision and particularly to those who are vulnerable, there’s certainly been stories over the years that those who haven’t got a lot of power and tend to be tucked away in the corner of the world, corporations can make a lot of money about them and are quite comfortable that complaints don’t get made, things slide over time. How do you make sure you don’t get involved in something, unwittingly? BRYN JONES: Yes a couple of things, so I’ll picked on one bit and I’ll pass over to Kate but, pre-pandemic we went around a lot of places. So I went up to Blackburn to see places for people and the community they’d built. I went to Wigan to see Belong which is an elderly care home. We’ve also been over to St Albans to look at some other deals that we’ve been invested in and where they’re building homes for the homeless. And we’ve actually been around and physically gone in to these buildings to see what they look like, what they feel like and actually speak to the owners of them or the people operating them to get to see, are they just there to earn money or do they really believe in what they’re doing. And I think that’s key. And we’re just in the process now of doing more case studies, now that, post-pandemic and we can travel about going to see some of the investments that we’ve made over the last three years. And these are not just limited to social housing; these are also renewables, hydroelectric plants and wind turbines. So we’re keen to get back out there and have a look at that. But I will pass over to Kate on some of the engagement we’ve been doing as well. KATE ELLIOT: Yes because I think it’s really important to note that even with the best run organisations out there and even if we’ve done all of our due diligence, issues can arise, and for us it’s about understanding whether that is an unfortunate isolated incident that is kind of being dealt with as proactively as possible or whether it’s an early indication of more systemic concerns, and that’s where engagement can really come into play where we can go out, we can have conversations with companies and we can encourage them to adopt best practice. So, within the social housing sector, over the past couple of years we’ve been talking to a number of operators within that space, particularly around transparency. So to go back to earlier points we were discussing on kind of consistency of data. So making sure that these organisations are reporting indicators in a consistent way, so we can understand where laggards and leaders are, and then understanding how that relates to the underlying performance of those organisations. Through those conversations with companies and through the sustainability reporting standard for social housing which is a multi-stakeholder initiative that we were part of in its early stages, we’ve seen an improved consistency in reporting. And it’s now as we see the kind of first reports being released with this new standard in place, it’s now about going back and holding them to account and saying you have said that you have done this, let’s see the evidence for it, let’s see why you may be above or below your peers in certain areas. PRESENTER: Now we’re pretty much out of time so I wanted to finish by just getting a final thought from each of you. We’re looking, we’re picking up on some of these important themes around sustainable investing, particularly in fixed income over the next 10, 20 years, one key point to leave us with, what would it be? Bryn, let’s start with you. BRYN JONES: Don’t forget really that you still need portfolio insurance in your portfolio and fixed income is providing that and more likely to provide that to you now than it has done in the last five years. So, whilst asset allocators, start of the year might have been getting nervous about fixed income, if you’re underweight fixed income or you’re sat in cash, at some point in the next six to 12 months, it’s going to be an extremely good opportunity to be buying fixed income. PRESENTER: Thank you, Noelle? NOELLE CAZALIS: I guess what I would say is during periods of volatility and crisis, remember how safe your income is. And we see when you have big equity drawdown, suddenly dividends get cut but actually if you stick to high quality investment grade paper, your risk that your income gets slashed is very low. PRESENTER: Kate? KATE ELLIOT: For me, it’s about seeing beyond a lot of the terminology so seeing beyond labels like sustainable or ethical and a lot of these different labels that are thrown around in the market and to consider what’s actually going on underneath the bonnet. So looking at the credibility of teams, at their commitment to sustainability and how well that’s evidenced through into the underlying holdings within investments. PRESENTER: Thank you, we have to leave it there. Thank you for watching, do stay with us, we’ve got some information coming up in just a second on how you can use this as part of your structured learning. From all of us here, thank you for watching and goodbye for now. END OF RECORDING