Comfortable being uncomfortable: Maintaining conviction

A single question

Disney’s bonds are a classic example. At the start of Covid, when lockdowns began, Disney had to shut all its theme parks. Yet it still had to maintain them operationally, which costs money. At the same time, it was trying to launch Disney+, spending heavily on technology, legal agreements and buying back its titles from other streamers. This may have looked disastrous from many angles, but from a bondholder’s perspective, none of it really mattered. The key question instead was: will Disney go bust? The answer was clearly no. It had a strong balance sheet and fantastic assets, and would continue to exist in one, two and three years. So we asked ourselves: should we be buying these bonds, given they were behaving as if the company wouldn’t exist in a few years? And the answer was yes.

There are less extreme examples too, like the tariff news in April. While we couldn’t predict exactly where tariffs would land, we could look at cross-border trade levels and assess which companies were more or less exposed. That allowed us to strip out the speculation. While all auto manufacturers sold off, we knew the news didn’t mean that no one would ever buy a car again, or that manufacturers would stop buying steering wheels and so on. Once we remove that kind of future speculation, we can focus on the actual risks we’re willing to run. 

The second component of our edge is structural. Typically, large fixed-income asset managers have teams focused on specific market segments – they will have a US investment-grade team in the US, an emerging markets team, a high-yield team, and so on. I believe our biggest differentiator is that instead of having portfolio managers narrowly focused on their individual markets, we each have client responsibilities across portfolios. While there are specialisations within the team, each of us is aware of what all the portfolios are doing.

When we come across a brilliant idea – for example, a bond that looks really cheap – we immediately ask: what kind of cheap is it? Is it cheap relative to others in its sector? Or is the whole sector still expensive? Maybe it’s great value compared to investment grade, or perhaps it’s compelling in absolute terms. That determines where it belongs: high yield, investment grade, multi-asset credit or all three.

This is why we use a matrix structure for fund responsibilities. Everyone on the team understands what each portfolio is trying to achieve. So when someone finds an opportunity, they instinctively know where it fits. We encourage people to share even the simplest ideas: “I found this, and I think it’s great for high yield – but maybe even better for investment grade.” That breaks down silos. It’s about which client or fund the opportunity best serves.

And when markets aren’t rewarding risk, portfolios naturally de-risk. We look at what we’re holding and ask: are we still being paid for this risk? If not, we take profits. And if there’s nothing compelling to replace it, we wait. There’s no need to force marginal positions. That patience means we’re ready to act when new opportunities emerge.

Maintaining conviction is never easy

These two elements: how we think about markets, and how we structure ourselves, are really the only two things an asset manager has in their control. Our ambition is to deliver consistent levels of performance, and doing so differently and – crucially – with discipline, is really important. Discipline means that we can continue chalking up runs on the board, even in periods when performance isn’t exciting because the opportunity isn’t there. But it does mean that when the opportunity is there – generally when something has happened in the market so the market has fallen in value – because we have been disciplined about valuation, we have the means to get involved.

Maintaining conviction in expensive markets is never easy. The longer it persists, the more natural it becomes to question your decisions, your timing – even whether “this time is different.” But experience teaches us that it rarely is. Markets recover, and the world doesn’t end. Often, the most uncomfortable decisions are the right ones. 

One of the most powerful tools investors have – but often overlook – is time horizon. It doesn’t show up on a balance sheet, but it can be a real superpower. In stressed markets, when asset prices are falling, the ability to say, “I know this is cheap, and I don’t care what the price is tomorrow because I believe in its long-term value,” is incredibly powerful. Many investors are constrained by short-term pressures – collateral calls, risk limits or fear of further losses – which stops them from acting when they should.

Clients often have the luxury of time, but don’t always use it. What we try to do is help them lean into that strength. They may not see immediate results, but over time, those decisions tend to pay off. 

This is where our team structure really matters. In tricky periods, it’s hard for any individual to stand firm and act decisively. With our matrix-style team, no one has to do it alone. Ideas are shared, tested and supported. It’s not about finding a rare individual with perfect conviction; it’s about creating a network that gives everyone the confidence to act.

Turning over the rocks

Credit investing is not particularly glamorous. We have a universe of possible investments, and we turn over those very same rocks every single day, looking for something different. We’re looking for movement: in credit fundamentals, in price. 

Fixed income has a pattern to it. Companies are constantly borrowing and refinancing. In the morning, we are typically bombarded with a whole series of new issues, so there’s a period when it’s all hands to the pump and we’re all looking through the list. There are some very frequent issuers, whose risks we understand already. At the other extreme, there are some completely new companies, where our analysts will be sharing their research for the very first time. 

We have a morning fixed-income team meeting where analysts share brief updates on company results and news. This acts as a kind of teaser for us to go and look at our portfolios and follow up with the analysts to discuss the relevant points in more detail. Then the US market opens at lunchtime, and the whole process begins again. In between all of this, we’ll have client enquiries and updates, or we might interact with our stewardship and sustainability team to discuss some company-specific ESG issues. 

One of the most interesting parts of the job is how it constantly evolves. Client needs shift, markets move, and we adapt – whether that’s refining guidelines or rethinking portfolio approaches. You have to be comfortable with change; some days you wish the world would pause, but most of the time, that pace is what makes it exciting. 

Curiosity is essential. If you’re someone who wants to understand how trade, politics, economics and corporate finance all connect, this job gives you the space to explore it all. It’s not about having perfect foresight – no one does – but about being willing to dive in, ask questions and make sense of complexity. 

I got told off the other day for using the word boring. Somebody said: “Stop saying boring, you've got to start saying disciplined!” Markets may be expensive at the moment, but the beauty of fixed income is that there’s always something to do. So we keep our heads above water, recognising that the market is expensive, and waiting for it to change. When it does, you won’t hear a peep out of us: we’ll be hitting the screens, picking up bargains and doing what we love.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast and they should not be considered as a recommendation to purchase or sell any particular security.

Contributor
Richard Ryan, Co-Head of Fundamental Fixed Income