For M&G Plc fund manager Wolfgang Bauer, who has a PhD in chemistry from the University of Cambridge, it’s worth being careful when it comes to how much trust to place in models so far, given the scatter-shot nature of the information available.
“The situation is evolving so fast that any attempt of a precise assessment of the wider implications is nearly impossible as the error margins are so high,” he said. “When valuations are so tight that the error margins are almost not existent, then any negative development or news -- be it weak macro data, political risk flaring up or a ‘black swan’ like corona -- can be painful. If I’m not compensated well for taking risk, I scale back.”
James Athey, a money manager at Aberdeen Standard Investments in London, said his team was positioned defensively at the start of the year because risky assets appeared to be pricing in a “utopian future” at a time when the global economic cycle appeared to be approaching an end and unable to withstand a negative shock.
“Of course we didn’t, or couldn’t, predict coronavirus but, as we say, we look for ‘vulnerabilities not triggers,’” he said in an interview.
He has been taking his virus cues from epidemiologists and organizations such as the U.S. Centers for Disease Control and Prevention. Still, he’s also been talking about a post-apocalyptic horror movie about a mysterious virus that creates zombies who run roughshod over London.
“I did quote ‘28 Days Later’ when describing the various outcomes on the desk,” said Athey.
This article was provided by Bloomberg News.