Greg Fuss, equity portfolio manager
After a long career, Capital Group equity manager Greg Fuss is retiring in February. Below, he shares his thoughts on current market conditions and explains how Capital Group prepares in advance for portfolio manager transitions.
Let’s start with what seemed to be so obvious a few months ago. It’s fair to say that many people thought we were headed for a recession. In fact, many of the elements that normally lead to downturns have occurred. But at least to this point, the economy has been resilient.
That’s been good for the average person. Recessions can be painful. For portfolio managers, though, it’s been challenging because it means that what seemed likely has not yet come to pass. It’s been a little more difficult than normal to figure out how to position portfolios. I don’t spend a lot of time positioning for macro beliefs, but, if I expect a recession, I will shade portfolios in the right direction on the margin.
The U.S. portfolios that I managed did very well versus the indices in 2022. There was a big falloff in the market and the first hints of a recession, so you can infer that there was a general defensiveness to my selections. Fast forward to today, and now the consensus is for a soft landing. I’ve been trying to reverse some of my earlier defensive moves — but again, only on the margin. That has amounted to buying some companies that are a bit more cyclically oriented. What’s always been my North Star is a focus on companies that are well managed, high quality and have good balance sheets but trade at a discount.
Capital Group has one of the most long-term-oriented, well-thought-out succession planning processes in the industry. It’s a great luxury knowing that abrupt departures are very rare, so we can plan for a smooth handoff from one portfolio manager to another. My circumstances are no different — I’ve been planning my retirement for about two years.
The retirement transition process is part of how we maintain our multiple portfolio manager system. I’m one of several portfolio managers on each of the funds I manage. I bring a particular viewpoint to my mandates, but my point of view is only one of many. I’ve always thought of our process as one of trying to assemble a jigsaw puzzle. By definition, investing is always going to have some uncertainty. It’s always going to be missing a few pieces. But the more points of view among the portfolio managers, the more puzzle pieces you can find, I believe the better off you’re going to be as an investor.
One of the ways we facilitate that transition lies in the multiyear process by which Capital Group develops investment professionals. Newcomers typically work as analysts for many years before slowly transitioning into portfolio management while still working as analysts. Capital Group gathers years of due diligence by watching how someone thinks, how they approach good times and bad times, to get a sense of who a person is as an investor. When it comes time to select a new portfolio manager, we’re choosing from among those who have a demonstrated track record and a known style.
Some of the most fun and productive parts of being a portfolio manager are the company visits and the discussions we have afterward. These visits are ingrained deeply in the Capital Group culture, and it goes back to that desire for different opinions and viewpoints. It’s very common for a taxi full, or even a bus full, of Capital Group people to roam from corporate headquarters to corporate headquarters and from factory floor to factory floor, observing and asking questions.
It’s great to get out from behind a computer screen and into the environment. And I think these visits create a different dynamic than having a company management team come to our office. As an investor, you can spot things in the factory or the headquarters that you might not have seen or thought about in one of our own meeting rooms. We hold debrief sessions at the end of the day of travel, where we can exchange our ideas and observations. It’s really a very rich way to do primary research. Through this process, I think we often come up with a clearer picture than our competitors might.