Magellan chairman and CIO Hamish Douglass has said he’s not afraid of missing out on a “short-term market rally” and that mutant virus strains pose the biggest risk to markets in 2021.
Questioned over why Magellan’s global equity strategy had lagged the stock market rally over the last two months of 2020, Mr Douglass said that the company’s priority was “protecting investors from losses” and that it was a short period to evaluate.
“The way we see it, the pandemic is an event of huge scientific complexity and many investors seem oblivious to these risks….Do I lose sleep over missing out on some of this short-term rally? No. Our aim is to deliver satisfactory returns while protecting people’s capital,” Mr Douglass said.
“This approach has delivered strong performance during many market downturns since inception in 2007. We are never going to bet on an oil strike or the equivalent, which is one way to see the vaccine results. After all, some important vaccine trials failed.”
Mr Douglass has previously said that he had “no fear of missing out” on the rally due to the significant number of “known unknowns” surrounding COVID-19 – including deteriorating US-China relations and the true scale of unemployment.
“We don’t know whether the world is on a bridge to recovery or on a bridge with a cliff at the other end. As we don’t know, we will not speculate or gamble with our clients’ money. We understand the limits of our knowledge,” Mr Douglass said in July 2020.
Mr Douglass also predicted that the Democratic sweep of Congress would see a “stronger recovery in the US” and sounded the alarm on potential mutant virus strains that could reduce the effectiveness of vaccines already developed.
“Scientists are already concerned about some strains of the virus such as the South African variety. There is the possibility of an escape mutation developing during a prolonged vaccination process. No one can accurately gauge the probability of whether or not the current mutations or an escape mutation might make the vaccines we have ineffective,” Mr Douglass said.
“Now is not the time to be oblivious to the pandemic risk, especially given infections we are seeing in Latin America, the UK and the US. Hold on to your chairs if investors suddenly decide that a mutant strain has rendered ineffective the vaccines that drove the November rally.”
The pace at which the world is able to vaccinate itself will be more important in determining the ability of the global economy to bounce ba...