x Abu Dhabi, UAEMonday 22 January 2018

Psychology of queues and cranes

What drives investors? A funds manager, who analyses everything from complex figures to activity at shopping malls, says he always saves money and rarely spends.

Gianluca Giardina, the senior funds manager for MENA region, says travelling for a year enlightened his thoughts on money.
Gianluca Giardina, the senior funds manager for MENA region, says travelling for a year enlightened his thoughts on money.

I see money as a means to an end. It gives greater choices and comfort. Generally, I have always been a saver rather than a spender. I have never used my overdraft facility, even as a student. I do not disclose how much I save or invest. But I can say that I do it regularly by putting money into mutual funds invested in equities and fixed income. I also invest directly in stocks and bonds. The principle of my investment is to diversify in asset class, geography and currency.

I hold land and property in Brazil because I believe the Brazilian economy will continue to grow for years to come and because the price of property in relation to wages there is affordable. However, I also have a personal interest in Brazilian culture. My interest in finance dates back to my early years because of my family background. My father and uncle were bankers. They worked in Europe, North Africa and Saudi Arabia.

I am 38 and have been a fund manager for about five years now. I consider it the best job in the world because it gives you the chance to meet the top managers of public companies and learn from them and how they run their companies. This job always keeps you on your toes and you're always learning. You don't just analyse numbers; it is also about understanding the psychology of the market. You are always trying to comprehend what drives and motivates investors and all the players in the market and the economy. It's not a job you can ever switch off from; when I'm not at work I try to analyse what's going on around me. I am analysing the market by how crowded the malls are or how many cranes I see when I drive around.

I started in banks more than 20 years ago. When I was 17 years old, I got an internship in London in a bank that was then called Midland; it has since been acquired by HSBC. I loved London, probably for all the wrong reasons - I really enjoyed the city's clubs. I began university with the intention that I wanted to move to London to work in the financial industry after graduation. I studied economics and business at La Sapienza University in Rome. I graduated cum laude in June 1996 and bought a one-way ticket to London two weeks later.

My first job there was an internship in a German bank where I mostly made coffee, copied documents and tried to learn about the bond market from the folks who worked on the trading desk. I was at this job for few months but my interest was always on the buy side within the financial industry, such as managing funds. I turned my attention and job-search efforts to the pension industry because I was dating a demographer who told me about the rapidly rising retiree population, the "ageing ticking bomb", if you will.

I landed my first contract with Prudential Portfolio Managers in July 1997. Very quickly my career drew me to equities. It was a good fit because at La Sapienza I wrote my thesis on evaluating companies through cash flow methodologies. From Prudential I moved to Schroders where I became an equity analyst. I started covering airline companies and was given the opportunity to run portfolios. From there I moved to Fidelity Investments where I analysed transportation and other sectors, which allowed me to learn about other industries.

Even in the early days of my career, when I was on a low salary, I would make sure that I saved at least something at the end of each month. I would occasionally then dig into my savings to buy something, such as a car or do a trip. In general, I tend to spend more money on travelling and entertainment rather than cars, clothes or other objects. In 2003 I had to return to Italy for personal reasons, so I quit my job. I also decided I wanted to see more of the world. I started in Peru, went to the US, and saw it coast-to-coast. I did white shark diving in South Africa. I also went to Sydney, Hong Kong and other parts of Asia. I lived off savings and adapted to living simply.

Then I finally ran out of money and had to go back to work. I returned to London because it is truly the global centre of finance. Some of the best minds work in London. New York and Hong Kong are much more for domestic finance. Taking the year off served my career. Travelling puts you more in contact with other aspects of the economy and consumer trends in ways that sitting at your desk and reading newspapers would not.

Investing in the stock markets requires you to understand the fundamentals of the economy and companies, and you need to relate to the real world. Living in the financial world sometimes precludes you from learning about consumption on the street because you become part of the small part of high-end consumers who are not necessarily connected to middle-and- low-income consumer trends, which is actually the bulk of the economy, especially in Europe and the US.

Indeed, the year off had a significant impact on my career. I left as an equity analyst, and when I came back I was given the chance in 2004 to be a fund manager at Baring Asset Management, running a mutual fund that invested in German equities. I was part of a team running the Baring German Growth Trust. The media exposure over the success we had in running the fund made my name in the European mutual fund industry. We received a lot of press coverage because we were among the first on the buy side to make the call to invest in German equities.

Investors at that time were hesitant about Germany because the country had been in recession chronically for a long time. But we saw low valuation in a market where changes were in the making; we believed that Germany offered high growth opportunities because of years of restructuring. We followed an aggressive approach to management of the fund and it paid off. Professional Advisor magazine runs a lead table on successful fund managers, and last August I was picked at number 10 in its 100 European fund manager picks.

I loved my job and I loved the company I worked for. Relocating to the Gulf was not on my radar screen. But I accepted last summer the offer from Emirates NBD because it was a great opportunity to start a new product and to learn about a whole new area of the world that I didn't know much about. The recent quick turnaround in the market from a bull situation to a bear situation in the middle of last year has been an amazing learning curve.

Two years before the crisis happened I had been critical and negative on the future economic outlook because I could see the system was too indebted. I was advising people to sell their properties and keep cash. Having said that, the economic deterioration and the deterioration of the markets have been far deeper and quicker than anything I expected, and that has been the biggest surprise. I was expecting a much more gradual sort of change.

Certainly it has been stressful to watch the value of your assets and the funds under your management go down. However, any turning points of the markets, either from a bear to bull or from bull to bear, is when you can make a lot of money. In general terms, earnings growth tends to be the main driver of the stock price. So, you have to rotate your investment between sectors and stocks and pick those with cheap valuations and potentials for restructuring. These companies are likely to have future earnings growth.