view under a bridge

Meet the Managers

Peter Bentley and Adam Whiteley from Insight Investment | February 2016


Insight’s Peter Bentley and Adam Whiteley discuss what’s important to them in their careers as fund managers.

What appealed about studying economics?

[ADAM WHITELEY] Economics brings together the ‘real world’ and academic theory, as well as how markets and economies behave and interact. The ‘real world’ is not black and white and exhibits much more of a spectrum.

At university, the behavioral module particularly interested me – how people’s decisions are influenced by social, behavioral and psychological factors. It’s not the ‘right answer’ that generates returns rather what the market as a whole believes is the ‘right answer’.

When it came to fund management, having done macro and microeconomics, my skill set was suited towards credit. I look at companies from a bottom-up perspective, while at the same time being aware of what’s going on in the bigger picture.

What attracted you to fund management?

[ADAM WHITELEY] Fund management looked like it was a good mixture of intellectual challenge and interest as well as offering a good work-life balance. One of the great things about fund management is that there is always something new to get to grips with.

[PETER BENTLEY] For me, the appeal of fund management was the intellectual stimulus and variety. In the credit markets, you are looking at dozens of different permutations and combinations of investment strategies and so the variety is almost endless.

Starting out, bond markets attracted me because they provided an opportunity to apply what I’d learned in mathematics and economics. I found equity markets tended to be a bit more ‘story based’, which I found less appealing. Also at an early stage in my career, I got a sense that bond markets were a growth area and there were more opportunities to push the boundaries of something new and make a different contribution.

What was it like beginning your career at the BoE?

[PETER BENTLEY] Without wishing to sound flippant, it was like a ‘finishing school’ in finance. I gained significant exposure to important people, such as the governor and senior BoE directors, as well as chief executives and finance directors at major financial institutions. Besides learning to brief senior people, it taught me how to analyze markets. At this early point in my career, I got a sense of the big picture stories rather than the narrow focus of many first jobs. I was there for the collapse of the UK’s Barings Bank in 1995. It was an example of financial risk management gone wrong and illustrates how things seemingly taken for granted in terms of risk can quickly turn against you. And I saw how it affected the institutions – the discount houses, the money-market and bond counterparties of the BoE – that we were regulating.

What led you to specialize in corporate bonds?

[PETER BENTLEY] Corporate bonds were expanding and developing quickly in the late 1990s – they went from being relatively sleepy to clearly at the leading edge of innovation.

Since then the types of bonds issued have broadened, as have their characteristics. At the same time, there has been a big globalization of markets and an expansion in the use of derivatives.

Derivatives are an extremely useful tool. They allow you access to investments and exposures that may not be available in the cash market if there’s not the right maturity of bond. You can move quickly and effectively in and out of different credit markets as well as hedging out risk you don’t want in the portfolio. However, like any investment, if you invest without full knowledge and scrutiny, they can be dangerous.

What was it like starting out shortly before the financial crisis in 2008?

[ADAM WHITELEY] Starting before the financial crisis gives me a slightly different perspective. I was not pre-programmed to think: ‘this is what happened last time’. You can go through a whole career and not experience a crisis like that.

What stands out in my mind from that time is how rapidly events can unfold. I was struck by the speed at which large institutions can unravel. The ripples continue to be felt even today.

The experience taught me to expect the unexpected and not to assume that relationships will hold constant.

What was your impression of the financial crisis of 2008?

[PETER BENTLEY] No one expected it to be as major as it was. But it was certainly a useful grounding in risk management. Everyone who came out the other side is stronger and better for it.

It was a classic lesson in managing risk effectively, as things that seemed like minor risks quickly developed into major risks. It showed how assumptions on relative value and correlations between seemingly closely related asset classes were able break down quite quickly.

The main thing I learned was to do with hedging – offsetting risks in one area of a portfolio with short positions in another area. In normal market conditions, you may look as if you’re flattening that risk but you still need to budget for it. It is something that needs to be very carefully managed.

In a sense though, the 2008 crisis was a kind of career highlight in that it was distinct and memorable and helped me to learn a lot.

Although the credit crisis of 2001/2002 was not on the same scale and was characterized by frauds and defaults, it taught the lesson you need a whole range of instruments to assess credit worthiness apart from traditional ones. It pays to exercise a healthy degree of cynicism about anything that looks to be too good to be true.

In terms of risk management what do you keep foremost in your mind?

[PETER BENTLEY] No risk measure is the right one and risk management is more of an art than a science if you are doing it properly. It’s dangerous when people say they have a perfect risk management model – it always goes wrong. Be broadminded and look at lots of different ways of investing and assess the risks you’re running.

[ADAM WHITELEY] I’d agree there is no single risk measure that is correct. There is a need to look at a variety of different risk metrics and at the picture that this combination creates to determine what’s really going on. It is useful to have a combination of what market pricing is currently telling you alongside what history reveals.

What shapes your investment style?

[ADAM WHITELEY] I have to process a large amount of information and assimilate key drivers, while stripping out the noise of the market. That allows me to frame a series of outcomes to help guide the possible returns we might realize.

If you don’t understand a company, its product and the management or simply why markets are behaving the way they are, then that is a warning sign that you should be staying away and not taking any risk. Poor governance is definitely an alarm bell.

In the credit sphere, you need to be aware both of what individual companies are doing and also what the macro picture looks like. Is central bank action outweighing corporate fundamentals? Is a company producing enough cash to pay interest on its bonds? Is it carrying too much debt? What risks are they exposed to? The threat from technology, for instance.

[PETER BENTLEY] My approach as a fund manager is to use the broadest range of tools and instruments and markets possible in order to best meet the type of mandate I’m trying to run. I keep a relatively open mind as to the best way of achieving what a client wants, while always being conscious of risk management, in particular scrutinizing idiosyncratic risks. Also I’d emphasize learning about new instruments and assessing new opportunities; being reasonably self aware and humble is an approach to life that can also be applied to asset management. That and not taking things for granted.

What do you like to do outside of work?

[ADAM WHITELEY] I enjoy watching rugby, football and motor sport. In fact, any team-orientated sport.

A few years back, I did an ironman triathlon in South Africa with a group of friends raising money for Macmillan Cancer Support. The camaraderie was fantastic.

[PETER BENTLEY] I run and cycle as well as play football and cricket. I like to keep up with cultural things – music and theatre, for instance. I prefer to have a broad range of interests. It’s a similar approach to my investment style.

BNY Mellon Investment Management is an investment management organization, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally. This information is not investment advice, though may be deemed a financial promotion in non-U.S. jurisdictions. Accordingly, where used or distributed in any non-U.S. jurisdiction, the information provided is for Professional Clients only. This information is not for onward distribution to, or to be relied upon by Retail Clients. For marketing purposes only. Any statements and opinions expressed are as at the date of publication, are subject to change as economic and market conditions dictate, and do not necessarily represent the views of BNY Mellon or any of its affiliates. The information has been provided as a general market commentary only and does not constitute legal, tax, accounting, other professional counsel or investment advice, is not predictive of future performance, and should not be construed as an offer to sell or a solicitation to buy any security or make an offer where otherwise unlawful. The information has been provided without taking into account the investment objective, financial situation or needs of any particular person. BNY Mellon and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. This is not investment research or a research recommendation for regulatory purposes as it does not constitute substantive research or analysis. To the extent that these materials contain statements about future performance, such statements are forward looking and are subject to a number of risks and uncertainties. Information and opinions presented have been obtained or derived from sources which BNY Mellon believed to be reliable, but BNY Mellon makes no representation to its accuracy and completeness. BNY Mellon accepts no liability for loss arising from use of this material. If nothing is indicated to the contrary, all figures are unaudited. Any indication of past performance is not a guide to future performance. The value of investments can fall as well as rise, so investors may get back less than originally invested. Not for distribution to, or use by, any person or entity in any jurisdiction or country in which such distribution or use would be contrary to local law or regulation. This information may not be distributed or used for the purpose of offers or solicitations in any jurisdiction or in any circumstances in which such offers or solicitations are unlawful or not authorized, or where there would be, by virtue of such distribution, new or additional registration requirements. Persons into whose possession this information comes are required to inform themselves about and to observe any restrictions that apply to the distribution of this information in their jurisdiction. The investment products and services mentioned here are not insured by the FDIC (or any other state or federal agency), are not deposits of or guaranteed by any bank, and may lose value. This information should not be published in hard copy, electronic form, via the web or in any other medium accessible to the public, unless authorized by BNY Mellon Investment Management. Issuing entities. This information is approved for Global distribution and is issued in the following jurisdictions by the named local entities or divisions: Europe, Middle East, Africa and Latin America (excl. Switzerland, Brazil, Dubai): BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Conduct Authority. • Switzerland: Issued by BNY Mellon Investments Switzerland GmbH, Talacker 29, CH-8001 Zürich, Switzerland. Authorised and regulated by the FINMA. • Dubai, United Arab Emirates: Dubai branch of The Bank of New York Mellon, which is regulated by the Dubai Financial Services Authority. This material is intended for Professional Clients only and no other person should act upon it. • Singapore: BNY Mellon Investment Management Singapore Pte. Limited Co. Reg. 201230427E. Regulated by the Monetary Authority of Singapore. • Hong Kong: BNY Mellon Investment Management Hong Kong Limited. Regulated by the Hong Kong Securities and Futures Commission. • Japan: BNY Mellon Asset Management Japan Limited. BNY Mellon Asset Management Japan Limited is a Financial Instruments Business Operator with license no 406 (Kinsho) at the Commissioner of Kanto Local Finance Bureau and is a Member of the Investment Trusts Association, Japan and Japan Securities Investment Advisers Association. • Australia: BNY Mellon Investment Management Australia Ltd (ABN 56 102 482 815, AFS License No. 227865). Authorized and regulated by the Australian Securities & Investments Commission. • United States: BNY Mellon Investment Management. • Canada: Securities are offered through BNY Mellon Asset Management Canada Ltd., registered as a Portfolio Manager and Exempt Market Dealer in all provinces and territories of Canada, and as an Investment Fund Manager and Commodity Trading Manager in Ontario. • Brazil: this document is issued by ARX Investimentos Ltda., Av. Borges de Medeiros, 633, 4th floor, Rio de Janeiro, RJ, Brazil, CEP 22430-041. Authorized and regulated by the Brazilian Securities and Exchange Commission (CVM). The issuing entities above are BNY Mellon entities ultimately owned by The Bank of New York Mellon Corporation. BNY Mellon Company information. BNY Mellon Investment Management EMEA Limited (“BNYMIM EMEA”) is the distributor of the capabilities of its investment managers in Europe, Middle East, Africa and Latin America. Investment managers are appointed by BNYMIM EMEA or affiliated fund operating companies to undertake portfolio management services in respect of the products and services provided by BNYMIM EMEA or the fund operating companies. These products and services are governed by bilateral contracts entered into by BNYMIM EMEA and its clients or by the Prospectus and associated documents related to the funds.BNY Mellon Cash Investment Strategies is a division of The Dreyfus Corporation. • Investment advisory services in North America are provided through four different SEC-registered investment advisers using the brand Insight Investment: Cutwater Asset Management Corp, Cutwater Investor Services Corp, Pareto New York LLC and Pareto Investment Management Limited. The Insight Investment Group includes Insight Investment Management (Global) Limited, Pareto Investment Management Limited, Insight Investment Funds Management Limited, Cutwater Asset Management Corp and Cutwater Investor Services Corp. This information does not constitute an offer to sell, or a solicitation of an offer to purchase, any of the firms’ services or funds to any U.S. investor, or where otherwise unlawful. • BNY Mellon owns 90% of The Boston Company Asset Management, LLC and the remainder is owned by employees of the firm. • The Newton Group (“Newton”) is comprised of the following affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited (NCM Ltd), Newton Capital Management LLC (NCM LLC), NCM LLC personnel are supervised persons of NCM Ltd and NCM LLC does not provide investment advice, all of which is conducted by NCM Ltd. Only NCM LLC and NCM Ltd offer services in the U.S.• BNY Mellon owns a 20% interest in Siguler Guff & Company, LP and certain related entities (including Siguler Guff Advisers LLC). INV00077 Expiry Date = 8/2/2016. T3613 01/16.

©2015 The Bank of New York Mellon Corporation.