Dr Ana Armstrong, PhD - Imperial College London
Armstrong Investment Managers LLP
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Dr. Ana Armstrong, MBA, PhD
CEO Armstrong Investment Managers LLP
An interview with Dr Ana Armstrong CEO, Armstrong Investment Managers LLP
For our dedicated interview on Structured Financial Solutions with Dr. Ana Armstrong, CEO of Armstrong Investment Managers LLP, Executive Global takes an exclusive look behind the operation of one of the world’s most distinguished investment management firms, delivering award-winning fully integrated asset management for high net worth individuals, family offices, and boutique wealth managers worldwide.
Dr Ana Armstrong CV
Imperial College London
1996 Investment career at Coutts
1999 Portfolio construction at UBS Wealth Management
2003 Insight Investment, BONY
2005 Non Executive Director, Aberdeen
2009 Established AIM
- Successful investment management career
- Entrepreneurial career with establishment of Armstrong Investment Managers LLP
- Published many articles related to investment management, quantitative modeling, including a survey of
Harvard Business School on “How
Stat Women Succeed”
- Presented papers at numerous investment and academic conferences
- Top 10 women in investments (2016)
- Best Diversified Macro Fund (2016) – Wealth & Finance Intl
- Most Influential Woman in Multi Asset Management 2016 – UK – Wealth & Finance Intl
- Gamechanger Of The Year (2015, 2016)
Structured Financial Solutions
EG: You deliver Structured Financial Solutions to a range of international clients. What are some of the ways you ensure that the solutions you provide deliver successful and sustainable financial results?
Ana Armstrong: The continued success of our funds will derive from our investment in human capital. Whether that means recruiting and consulting experts in their respective fields, considering the latest peer-reviewed research to identify strategic opportunities, or passing the output of quantitative models under the lens of our discretionary views, no method, algorithm or machine can replace the broadness, adaptability and ingenuity of the human intellect that created them all in the first place.
EG: What would you say are the fundamental characteristics that comprise a risk-adjusted, well diversified portfolio?
AA: Investment across both traditional and alternative asset classes is an essential component of any diversified portfolio, but it is not enough in the process of construction to feed one’s investment views through a quantitative risk model that only tells one what is likely 99% of the time, and depends upon historical correlations that can and will break down precisely when diversification is most needed. The weaknesses of the widespread institutional reliance upon Value at Risk which were exposed in the recent financial crises are a case in point. To the contrary, we believe it is key to real diversification that a portfolio be constructed from a set of different views, models and strategies that do not conflict with common sense, is regularly stress-tested for robustness across a range of scenarios, and can actively adapt to changes in market conditions. Diversification, in our view, is the only free lunch.
EG: Are there any particular hedging strategies fund managers should deploy in anticipation of a change in market conditions that may come about from the Federal Reserve raising interest rates?
AA: Managers should be shortening the duration of their bond portfolios, but with rates likely to rise slowly and to remain historically low it may make sense to balance exposure to front end of the curve with that of an intermediate duration. Receiving a floating rate on interest rate swaps is a classic hedge in this scenario, but floating rate treasuries have also been made available since 2014 which would eliminate the usual credit risk of floating rate products at the expense of earning bond buyers a smaller yield. It should be kept in mind, however, that longer-dated maturities are likely to find some support due to supply issues, slowing global growth, and higher yields in relation to most global bonds which still make them attractive to foreign investors.
With modest interest rate increases, equities may see a boost from improving economic growth, moderate inflation, better relative valuations versus bonds, and increasing investment. Banks are an obvious beneficiary of such measures, and value stocks are historically likely to outperform growth during periods of rising interest rates, so something as simple as selling Russell 2000 futures against one’s stock portfolio could add value here while protecting against market risk. Of course, commodities can be expected to suffer, but although one might expect, say, a 1% rate hike to create a 5% fall in the prices of agricultural commodities, this will already have been partially priced in, and fundamentals may play a bigger role in moving markets going forward.
EG: How does your analysis of quantitative macroeconomic models assist you in generating superior alpha, compared with other funds?
AA: We analyse the market environment and adjust our portfolio positioning to generate the largest return given the limited risk we are taking. Assessing the macro environment and different mispriced opportunities is essential. For example, there are many indicators showing that inflation is on the rise: increasing oil and other commodity prices, US wage inflation, further monetary easing in Europe following ‘Brexit’, further reductions in interest rates, etc. Investing in strategies that will protect and enhance investors money is the first objective. Putting these strategies together in an efficient way to ensure that the portfolio compensates investors for the risk taken is another step. Continuous monitoring of a portfolio and adjustment to the changes in the macro environment are essential.
EG: What are some of the unique characteristics of your management
style that enable your AIM Multi Asset Fund to be successful in comparison to other hedge funds at a time where global equity indices have slowed?
AA: The interaction of quantitative systematic investment strategies with the common-sense approach of discretionary management is a defining characteristic of the way we manage money. While purely discretionary managers are struggling to find sources of return without a trend in markets, and model-driven trading that doesn’t make sense in the current environment has incurred sharp drawdowns, we have been able to harness both approaches to provide solutions to existing problems. Whether in making correct calls on the British Pound around ‘Brexit’, benefitting from foreign currencies correlated with the oil price recovery, temporarily disabling our long-short momentum trading, or exploiting mean reversion on equity index spreads, this interplay has been essential to our success.
EG: You have been tremendously successful as a hedge fund manager, and under your leadership, the award-winning team at AIM previously managed $6 billion at UBS, and $2 billion at Insight Investment. What macroeconomic trends you see on the horizon within the next 5-10 years, and how may investors prepare?
AA: As ever, China will play a huge role in determining macroeconomic trends in the future, with a restructuring of their debt and overall economy on the cards. It’s likely that the Yuan will appreciate heavily over the next decade and create heavy inflationary pressures in the region. Globally, we should expect stable but mediocre growth, driven in large part by the more advanced and developed economies. Emerging markets, however, will slow to far lower levels of growth than they have enjoyed over the last decade. Much of the growth around the world will primarily be supported by lower commodity prices. Both industry growth and household aggregate demand will benefit from lower input prices.
Overall there will be much divergence in economic performance, due to policy choices in the context of influencing structural reforms, given the reduced fiscal stimulus to come. There will, as ever, be significant economic (e.g. the so called ‘hard landing’ in China) and geopolitical (Middle East, Russia, China/Japan) risks that need to monitored closely. It is, of course, impossible to know what the landscape will be in 10 years but the key is to have the right logic and systems in place to cope with the challenges that are to come.
EG: What advantages would you say your experience in successfully leading portfolio construction at UBS Wealth Management, Insight Investment, and managing over £500 million in Assets Under Management, offer to new clients of AIM?
AA: Quantitative analysts and portfolio managers are on the rise in the industry but, in Dr. Ana Armstrong, we have a long and healthy track record of providing inflation-beating solutions and performance. She was trained by Dr. Hansjoerg Borutta at UBS and experienced working alongside some of the highest calibre quantitative minds in the industry. The company also has access to the most innovative, industry-leading research and is able to efficiently implement its ideas.
EG: How do your professional qualifications assist clients with their fund performance and analysis?
AA: Financial Markets have become more sophisticated as the market data industry has been growing exponentially over the last two decades. Processing of information that relies on algorithmic trading has been growing in demand. Most quantitative analysts who are looking at comprehensive sets of data, identifying inefficiencies and strategies that can generate positive returns in the relevant market environment are highly educated PhDs. The times of traders trading one particular instrument are gone. Traders are being replaced by skilled quantitative analysts who are better equipped to deal with the increasingly inter-correlated market environment.
EG: Could you explain what fundamental factors enable AIM to provide-inflation beating solutions that may be advantageous to institutional, retail, and family office investors?
AA: Inflation is the ultimate destroyer of an investor’s assets. Coordinated global easing of monetary policies and soaring commodity prices will further grow inflationary pressures. Our small but experienced team has a wide range of expertise and are able to act on strategies or ideas quickly.
Dr. Ana Armstrong's
Implementation of profitable
investment ideas backed by the
strong investment infrastructure.
Ongoing review of investment
strategies that perform in the current market environment i.e. choosing the right investment strategies for the relevant market environment.
Access to good intellectual capital
at a resonable price.
Dr. Ana Cukic-Armstrong, Ph.D is a hedge fund manager, entrepreneur and the Chief Executive Officer of Armstrong Investment Managers LLP, an FCA licensed Financial Institution.
Dr. Cukic-Armstrong led the portfolio construction at UBS Wealth Management, one of the worlds largest banks with assets CHF1.062 trillion (2014) and the multi-asset group at Insight Investment.
She has a doctorate degree from Imperial College London and frequently appears in the media as an investment expert
Following a major organizational restructuring, she announced that AIM attracted over 500 million pounds, along with key names, such as Cenk Aydin who joined from JPMorgan.
Dr. Ana Armstrong was the non-executive board member of Aberdeen Asian Income Fund Ltd
Dr Ana Cukic Armstrong previously worked as co-head of Insight Investment’s Multi-Asset Group. Before joining Insight, Ana worked as Investment Analyst at Coutts & Co, progressing to Portfolio Analyst at Fisher Francis Trees and Watts, and then to Head of Portfolio Construction for Managed Accounts programmes at UBS. Ana has a PhD and an MBA from Imperial College.
Generating Superior Alpha
EG: You advocate real diversification of assets in your investment style. Tell us about some of the ways in which your allocation between contrarian and trend following strategies across asset classes may mitigate risk for investors?
AA: Trend-following strategies can perform well over long periods of time, including market crashes, but are not a kind of magic bullet for a portfolio as they exhibit significant negative skewness in their returns. This means that during times that they do poorly, as was witnessed in the momentum crash of the second quarter of 2009, they do very poorly indeed, and exposing investors to the potential of such large drawdowns is unacceptable to our investment mandate.
There are, of course, ways to mitigate these problems by hedging out associated risks, but having access to a diverse set of strategies and the flexibility to combine or move in and out of them makes for a more robust portfolio. This year, closing our cross-sectional momentum trading in equities and utilising mean reversion strategies has allowed us to generate consistent returns with lower downside risk, even across the volatile range-bound markets that have plagued investors.
EG: Tell us more about your award-winning Global Macro Fund.
AA: Our Global Macro fund relies on different quantitative techniques. Some of them
are: cross sectional momentum and beta arbitrage. Cross sectional momentum is looking to identify stocks that have been outperforming in a broad universe of different assets: equities, bonds, currencies, commodities and add exposure to those stocks. Similarly, it is looking to identify which stock to sell to remove the market risk. Each “buy” is offset by “sell”. This strategy aims at positive returns regardless of the market movements.
Beta arbitrage is looking to identify mispricing between risk and return. Investors would like to be compensated for the risk they are taking with a higher return. This is not always the case. For example, last year, adding an exposure of low risk stocks and selling the stock of higher risk would have generated higher return than vice versa.
EG: You obtained your PhD in Qualitative Economics from Imperial College London, are a renowned financial commentator, and have had a successful career as a hedge fund manager. How would you say the rigours of study at the highest levels of academia helped you to emerge as a global leader at the forefront of investment management?
AA: Market data has become more available and quantitative algorithms have been developing over the last two decades. This requires a complex set of quantitative skills and understanding of different econometrics models to efficiently analyse the data. EG
Dr. Ana Cukic Armstrong, PhD is a hedge fund manager and investment professional with over 20 years of financial institutional experience. She leads the award-winning team that strives to combine the experience and reliability of an institution, with the client-focus of a boutique firm and the team provides inflation-beating solutions to institutional, retail, and family office investors.
To find out more information about Armstrong Investment Managers, please visit www.armstrongim.com