In conversation with Fabiana Fedeli

What do you consider to be the most important traits of your personality, which help you in your investing activity?

I am intellectually curious and have a thirst for knowledge. Investing is my job and also my hobby. Also in my spare time I love reading about markets, economics and geopolitics. I am an optimist who plans for the worst. As a portfolio manager, I used to always think of what could go wrong in an investment, and try to make a plan A, plan B and plan C of what I would do given different circumstances. Of course, we don’t have a crystal ball, and we cannot prepare for everything, but having a plan of action has helped maintain discipline, limiting emotional reactions and behavioural biases. 
 

What do you think are the most important qualities for your profession in general, and for being a CIO in particular, and why? And, what are your favourite sources of information?

Respect and consideration for other people, and a good dose of humility are important qualities. Being self-centred and believing that you are always right are unsuitable and sadly often still too common traits of many in our industry. You need to be able to admit to yourself that you don’t always have the best ideas nor the right answers, and it is important that you listen to others, particularly your team members. Also, having loads of mental resilience, enough for yourself and for your team, is crucial. 

I love markets, and I am a data junkie. I studied econometrics at university, so I love a good data series and a good chart. Many of my sources of information are conventional for someone working in finance: Bloomberg, Barron’s, The Economist, the FT. I love to talk to my team members, colleagues who invest in other asset classes, and to clients. I believe I learn a lot from these interactions. Having worked in a number of countries, I maintain a network of peers across the UK, Europe, the US, Asia and Africa. We brainstorm about what we see in markets, and we use each other as sounding boards. Getting a broad range of diverse perspectives helps to achieve a more faceted and nuanced view of what is happening out there.
 

What market signal or indicator do you watch the most, and what is it currently indicating? 

The indicators that I follow will necessarily change over time and with market circumstances. Inflation indicators such as Core CPI (consumer prices index), PPI (producer prices index), wages and, most importantly, their sub-components, are some which I closely follow at the moment. While inflation across most of the world has declined since its highs, it is still not at target levels for the Federal Reserve (Fed), the Bank of England (BoE) and the European Central Bank (ECB). There is a meaningful chance that the last leg of that decline to target levels will prove slower and less straightforward than the market has been expecting. That said, the direction of travel, given current data on inflation and economic activity, points to the first Fed, BoE and ECB interest rate cuts sometime in 2024. Any volatility across fixed income and equity markets caused by a slower path to cuts can represent a significant opportunity for active investors like ourselves.
 

Please describe the process by which you derive investment ideas with your team. 

Over the last few years, we have made a strong effort in creating centres of knowledge excellence across equities, multi-asset and sustainability, where knowledge and ideas are shared across the whole investment floor and become the inspiration for new differentiated investment opportunities. I draw from this high octane research and expertise pool for my role on the Investment Committee of our Crossover strategy, in which we invest in companies when they are still private, supporting them through the path of listing, and eventually hold them as public companies. In addition, with the Multi Asset team we get together once a week to discuss markets and the macro backdrop, and we are not afraid to challenge – respectfully – each other’s thinking. The results are captured in a monthly piece which is now sent also to other teams outside of Multi Asset.

We also have regular portfolio discussions with all of the heads of our Equities desks, where we discuss ideas and often uncover similar trends and opportunities at the opposite side of the globe. 

We live in an interconnected world where depth of research provides a real edge in the investment process, and I want to make sure that my teams have all the tools they need to deliver alpha to our clients.
 

How would you describe your current leadership style and how did you develop it? How did you build the current teams you lead, and how do you approach the development of talent within your teams? 

My team is far better placed than me to describe my leadership style. My hope is that I am fair, transparent, and that my team feels that I have their back. While I currently do not manage equities portfolios as I used to, I sit on the Investment Committee of our Crossover strategy, and I have portfolio oversight meetings with my team members. I have experienced and therefore understand the challenges my team goes through, and I hope such experience helps me support them better.

Importantly, I strongly believe in the power of teams, where the whole is bigger than the sum of the parts. No one is – or should be expected to be – 100% good at everything. Rather, there are some individuals that are 70% good at something and 120% good at something else. The key is to combine the different strengths of individuals, which allows for a stronger, interconnected and longer-lasting team. I also believe that there are personalities who detract from a team’s dynamic. You may have the best goal scorer in the world, but you still may lose the championship if everyone else around them is unable to function at their best, perhaps because they feel their energy drained out of them due to the self-centred personality of the goal scorer. There is only one decision to be made in that case as that person does not belong in the team.
 

What is the one thing that worries you about the market/global economy at the moment, and the one thing that gives you hope (and which one do you think will dominate the months ahead)? 

As an investor, I worry about many things. Trying to understand where the downside of our investment decisions can come from is a big part of the job. We are constantly monitoring the known unknowns as well as trying to figure out what unknown unknowns could come out of left field.

At the moment, geopolitics and the rise of extremism and populism are two potential sources of market volatility. It is important to realise that not all geopolitical upheaval hurts markets. It has to have an actual impact on the functioning of the economy on which that market relies. Think of the current conflict in the Middle East. While it touches us all profoundly, it has had limited impact on global markets. It would be different if the conflict affects countries that are significant oil producers, sending energy prices higher. 

As an individual, I am also concerned about climate change and the loss of biodiversity. As an investor, I believe it is important to understand the risks and invest accordingly. When it comes to hope, the world awakening to the importance of diversity gives me a lot of hope for the future of our world. This is a cause very close to my heart not only as a woman who started 25 years ago in the financial industry, but also as someone who has worked in many different countries with colleagues from very different cultural backgrounds. And one thing that excites me are the incredible opportunities that generative Artificial Intelligence (AI) is able to unlock. Of course, we have to ensure that such opportunities are used wisely and for the good.
 

What do you find inspiring? 

Human resilience in the face of adversity is something that I have always found inspiring. I also feel humbled by those who are willing to fight and die for their beliefs in the hope for a better world. We should not be afraid to voice our opinions, even when they put us in an uncomfortable situation. Of course, even when voicing out thoughts, we should always be respectful of others. The way we deliver those opinions is key.
 

What is your favourite book? 

I have many ‘’favourite’’ books, as a number of them have had different meanings at different times of my life and my career. One that reminds me of my early start in asset management is Reminiscences of a Stock Operator, which many believe is based on the life of stock trader, Jesse Livermore, in the early 20th century. It is a book that was given to me when I made the career change from sell-side research analyst to working for a hedge fund. It is a good reminder of the power of patience, the importance of timing, and the privilege of learning on a daily basis as an investor. It is also a reminder that fortunes can be made and then easily lost. It is important to be aware of downside risk as we are entrusted with our clients’ assets.
 

Do you have a hobby outside work? How often do you do it and how does it feel to do it? 

I love outdoor sports. I swim and go for long walks and hikes in the summer, and ski in the winter. Of all the sports I practice, skiing is the one that is able to take my mind off markets. I need to focus on what I am doing to avoid getting hurt. It is also a passion that I share with my husband, and we enjoy skiing together. Swimming, on the other hand, is more of my sport than my husband’s. Particularly longer distance swimming. It will often happen that I will be swimming along the coast while my husband walks on the beach alongside me. I am sure it is funny to see for other people!