Ruggins believes her academic pursuits prior to her career in financial services have helped her to better understand the behaviour of investors and managing client expectations.

“When we think about diversification, and when we think about it in context of the regional outperformance of the Magnificent Seven, we hear a lot about regret,” she said, giving an example of how her academic background fits in with her current role. “We have clients going to dinner parties who are being asked about their multi-asset long-term investment portfolios, next to an individual who’s gone all-in to the S&P 500.

“We’re having a lot of conversations right now about performance and objectives. When you’re appropriately diversified, you are of course going to have a smoother return. You’re not going to participate in those upswings as much, but you will hopefully have some cushioning when the valuations correct, which is what we anticipate will happen over the next 12-to-18 months.

“From a behavioural perspective, I think it’s about staying true to your objectives, practising discipline, and having conversations with advisers if you’re worried about performance, and then staying resolute in the fact that diversification and the appropriate spread not just across asset classes, but risk, is really going to be integral moving forward.”

See also: A broadening market: Will the Magnificent Seven continue to motor in 2024?

Ruggins currently heads up the SJP multi-asset research team, helping to inform decisions on portfolio construction, asset allocation, and strategic development ecosystems.

Before joining SJP, she was the Principal’s Fellow at the University of Edinburgh and research scholar for Queen’s University, Canada. She holds postgraduate degrees in the philosophy of economics and financial sociology.

Looking back on her career so far, Ruggins said: “It’s been a wild ride. I’ve always been inclined towards academics and, while I was waiting for the light bulb to go off and identify what I wanted my career specifically to be, I spent a lot of my time in academia. I have four different degrees in four different subjects, ranging from a Bachelor of Arts up to a doctorate in the social studies of finance.

“What I really did during that time was work on developing a core set of skills that I found came naturally to me that I enjoyed using and developing in my work. What I found over time is that those skills were quite transferable to all the different disciplines I was studying and the work experience I was having.

“The end goal for me was not a specific role at a specific company, it was more a pathway that would allow me to use those skills. I’ve studied, for example, international relations and philosophy. My master’s was in the philosophy of economics. And then my doctorate again, social studies of finance with more of a specialty in financial economics.”

Ruggins joined St James’s Place in 2018, initially as an analyst before becoming head of multi-asset research in 2021. She is currently acting head of investment specialists.

Explaining what drew her to financial services, Ruggins said: “It was the irreducible complexity in a lot of the ideas that we grapple with. I was able to take a lot of my learnings from social sciences and philosophy and apply those to the hard sciences, such as the mathematics, that I learned as well.

“What I really enjoy is living in that grey area and trying to reconcile the two, and trying to find answers to questions that aren’t easily quantifiable. I think that’s what a lot of us are attempting to do in the industry.

“That’s why I ended up in finance, to look at why people make the decisions they do, why regulators react to information in certain ways, and how trading behaviours and patterns change in response to the market. It’s all a mix of arts and hard sciences.”

See also: Baroness Dambisa Moyo: Why traditional multi-asset portfolios may lose their shine

Theory versus practice

Transitioning to a new industry often presents challenges. Ruggins’ own experience of moving from the world of theory into practice followed that path, as she described the first year of her move into financial services as the hardest of her career.

“I’d say the biggest shock was that there was no time for esoteric questions, there was a lot of focus on failing fast, and a lot of focus on getting the minimum viable product out there. That doesn’t mean it’s a bad product, it was still to a very high standard, but it’s just the minimum viable for that product.

“The resource constraints we’re operating in private industry forces you to act, think and prioritise your time in a completely different way. Whereas in academia, any tendencies you have towards perfectionism are almost celebrated and you can take much more time on more nuanced questions. I had to learn how to work at pace and how to prioritise my workload in a completely different way.”

In terms of investment decision-making, Ruggins believes establishing a team with diverse backgrounds and experiences is integral to building a strong process.

“It’s one of the most foundational elements to the research process, not just for manager selection, but for any type of debate that we’re having in the business. I’ve been very purposeful when looking at my team dynamics in introducing not just a variety of experiences, but a variety of backgrounds, and different professions and different qualifications into the team.

“So while we are a pure investment team, we don’t just have CFAs. We do have some PhDs, we have some masters and MBAs as well, and some individuals that don’t have higher education. I think the real difference we see when we build teams like this in a more holistic way, is the quality of debate. If there’s a culture of safety there, the quality of debate is much higher and much more robust.”

Away from investing, Ruggins has undertaken immense challenges to fundraise for charity. Last summer, she took part in a Transcontinental ultra-endurance cycling race, raising £20,000 for the St James’s Place Charitable Foundation by cycling across Europe from Belgium to Greece in under 14 days while providing her own mechanical, medical and navigational support. She plans to take part again this year.

In her teenage years, Ruggins was an Olympic hopeful, running her first Commonwealth Games qualifying time at 15 years old. However, her life changed when an injury required extensive surgery to both her feet. Soon after, she developed a disease to her nervous system which caused near total-body paralysis.

Speaking before the race last year, she said: “In those years my goals changed from running an Olympic qualifying time to surviving. But over time I gained confidence to try and flex my toes, feed myself independently, and hold a pencil well enough to write my name. During this time there were numerous charities involved in my care, and I could not have recovered without them.”

You can read more about Ruggins’ fundraising efforts on her Just Giving page.

This article was written for our sister title Portfolio Adviser

The economist and author tells our sister title Portfolio Adviser there is a “tug of war” debate as to whether rates will return to near-zero levels as inflation falls, then revert to a ‘new normal’ of 2% or lower; or whether the past two decades of ultra-low interest rates were an anomaly, and that they are set to return to a more normalised range of 3-5%.

Depending on which scenario comes to the fore, she says there will be significant ramifications on which asset classes will outperform, and which will struggle, over the medium-to-long term.

“Anything where the opportunity to generate returns is based on a low rate is going to suffer. So, anything that relies on leverage or on taking outsized bets – I believe venture capital falls into this space, for example,” she says. “This is why I don’t think the Targeted Absolute Return sector is winning right now, either.

“Of course, there is a debate as to whether we will return to a low rate environment, in which case these opportunities could become interesting again. But given what happened to markets in 2022, 2023 was a case of going back to basics and asking: ‘in a higher cost-of-capital environment, where will the genuine returns come from?’”

Over the last three full years, equity and corporate bond market returns have varied widely. In 2021, the MSCI All-Country World index achieved a total return of 19.6% while the Bloomberg Global Aggregate Corporate Bond index fell 2%. Then in 2022, global equities suffered with the MSCI ACWI falling by more than 8%, while global corporates also lost more than 6%. Both asset classes achieved positive returns last year at 15.3% and 5.5% respectively, according to data from FE Fundinfo.

These returns coincide with varying moves from developed market central banks in a bid to curb rising inflation. When central banks embarked on interest rate rises at the end of 2021, bonds suffered while economic uncertainty weighed on equities. Rate hikes continued throughout the course of 2023, with inflation beginning to fall by varying degrees across the US, the UK and Europe.

“In 2023 there was a lot of discussion about value investing returning to the fore,” Baroness Moyo says. “If we consider the businesses which can survive over the long term and generate real returns above the cost of capital, these types of businesses certainly do look interesting. Which is why what happened in 2023 was odd, because the performance of growth stocks such as the Magnificent Seven was an anomaly in terms of the mood music of markets, given the interest rate moves we had seen.

“In short, it has been too easy to make good returns in bog standard, traditional multi-asset portfolios. You didn’t have to go into long/short portfolios, or venture capital, or anything that required a lot of leverage to make returns. And in fact, it is those areas which have now become higher risk. So, for now, I would argue that it is still very difficult to make the case for people to allocate capital to absolute return strategies.”

See also: Morningstar: Are basic allocation strategies still relevant?

The economist says that, while investors started 2023 “excited about credit”, given interest rate expectations, they are now beginning to hold off and question longer-term themes, given continued economic uncertainty.

AI and decarbonisation

“I would argue that there are two huge key themes. One is AI; hence the Magnificent Seven breaking out of that value anomaly last year. The second one is decarbonisation,” Baroness Moyo – who is also co-principle at the Versaca Investments family office – says.

“The last time we had a catalytic move in the economy on a structural basis was the 1980s, when we saw tech investment opportunities. This is the next one.”

These two themes spell a “real fundamental shift” in how economies will work in the future and therefore which assets will perform well, the economist says, although she adds that the cost of capital “obviously matters” in terms of how people will play these markets.

In addition to historically higher rates, Baroness Moyo says geopolitics have become more volatile – at a time when markets are pricing in interest rate cuts.

“I don’t think anyone over the last year would have accounted for two wars, the announcement of 11 countries joining Brics, swing states – real issues that could now be re-inflationary,” she warns.

“US inflation still stands at 3.1%. Germany is in a recession and Europe is weak, which could signal that rate cuts could be on the docket.

“Geopolitics could be incredibly disruptive, and could mean we live a ‘higher for longer’ environment and that is set to continue.”

Finding dislocations

Alongside moving out of leveraged plays, this uncertain backdrop has also led Baroness Moyo to play equities more “opportunistically”, holding out for market dislocations in favoured sectors such as healthcare, or more attractively-valued companies set to benefit from AI.

“We are mostly looking at AI on a ‘wait-and-see’ basis for the reasons that I mentioned. But if we start to see real productivity gains and genuine possibility for disruption from AI, I think it will be an opportunity.

“What does this mean for us? It means a skew towards taking money out of equities and putting it into cash or bonds, and waiting for opportunities in these much more structured bets such as AI.

“If it is true that, over the next 20 to 30 years there will be a fundamental shift in how the world operates, we want to be a part of that. So, the best thing to do is to dip in and take some money out of markets where we could be losing and put it into bonds, which are earning us 5.5-6%, until there is more clarity around how best to play the AI space.”

That being said, Baroness Moyo has “taken a nibble” at some less widely-held stocks she believes are attractively valued such as US healthcare provider HCA and cloud-based software company Salesforce.

Not-so-magnificent Seven?

When it comes to the Magnificent Seven stocks – many of which have become synonymous with investing in AI such as Nvidia, Amazon and Alphabet – Baroness Moyo is less tempted and says valuations are “too rich”.

“I understand the whole euphoria; it’s the New Year, let’s all get excited. But the market has sold off a fair amount already, coming into the year.

“But when it comes to the Magnificent Seven, which are trading on high price-to-earnings multiples… We had a bad 2021, a mixed 2022 with a big skew to certain stocks. In 2023, my sense was that people were waiting and seeing. And now, I think people are waiting for that first rate cut, then they are going to bank as much of that return as possible.

“So if anything, I’m worried that markets are going to sell off. Not initially, but I think institutional investors could be waiting for a rate cut and a market rally, at which point they will bank their gains tactically.”

The other risk with the Magnificent Seven stocks, says Baroness Moyo, is that they account for a very significant proportion of the S&P 500. According to data from Yahoo Finance, this handful of companies accounts for 29% of the US index’s entire market cap.

“If I look at the Magnificent Seven versus the 493 remaining stocks in the index, and I had to take a bet on either a bigger rally among the Magnificent Seven, or a revenue catch-up from the 493 others, I am going to bet on the catch-up,” she reasons.

“Do I believe that tech is the future? Absolutely. But we are talking about a numbers game here. I am looking at multiples and margins, the ability to grow top-line revenue and the ability to cut costs.

“On that basis, I think it will be harder for those very efficient larger companies, which achieved enormous gains in 2023, to continue that growth. I think a lot of value has been squeezed out of the Magnificent Seven, and a lot of that value is now dependent on how they execute on AI.”

Value in energy

In contrast, Baroness Moyo says the energy sector offers attractive valuations. “Why? Because we’re consuming 100 million barrels of oil every day across 8 billion people. People need energy to live – whether that is from fossil fuels or from renewables. That is an area where I think there have been relatively bad returns, but there is real opportunity for upside.

“For me, value investing is about a compelling sector-based narrative that is based off of basic needs, such as food, energy and transportation. But these companies have to be well-run. You have to be able to look at the margins, the fundamental demand and what that might mean for long-term opportunities, in order to generate risk-adjusted returns above the cost of capital.”

For the economist, this could mean investing in companies which provide fossil fuels and are looking to embark on the transition to net zero, as well as those leading the charge on reducing our dependence on carbon.

See also: Canada Life’s Sriharan: The rules of engagement on asset allocation have changed

Zambia-born Moyo says: “When you have been raised in an environment – like I have – where electricity and water is not automatic, you have a very different understanding of how difficult it is to deliver energy and deliver water.

“In the west, there are a lot of people who have good intentions for us to move and transition into this new equilibrium, which is renewables-based. That’s fantastic. I don’t know anybody who is against that.

“However, we have to be sensible about what the costs of that journey are and how easy it is to execute. It’s 2024 and there are many countries around the world which cannot create energy on a sustainable basis. And I’m not just talking about desperately poor countries – this includes middle-income countries like South Africa. Even California has suffered from energy disruption.

“This, to me, is precisely the dislocation that presents investment opportunities. The vast scale of our energy requirements, the need to transition, and the requirement to find the best companies at actually providing this.”

Has Japan turned a corner?

On a regional, macroeconomic basis, Baroness Moyo is positive on the US and Japan. When asked whether Japan has become a consensus trade, given its recent stockmarket rally, Baroness Moyo says there are two key reasons the market has performed so well. “One is technology and the other is energy – the two big long-term trends driving markets. These are massive pivot points for the world, and I think people see Japan as very much at the coalface of that.”

But people have been predicting a “new dawn” for Japan for decades – since its economy slumped throughout the nineties. Is the recent recovery the real deal? The economist does indeed believe the country has “turned a corner”.

“It’s extremely difficult to run an economy, to get a slow economy moving, and to get businesses and companies to work efficiently. There is a whole potential system of errors – a lot of things have to go right, and we have seen in the past how quickly things can fall apart. Germany was a huge economy doing well, and look how quickly it has come off the rails,” she explains.

“Japan has a lot of things going right for it. It has strong levels of high education, it has a business sector which is sharp and knows how to innovate. It is difficult for a country to put these things in place.

“We have seen it in the UK – I often talk about how, 15 years ago, business was a big piece of the story. Business accounted for a large part of the UK economy; everyone was talking about the banks, Rolls Royce, Marks & Spencer. Today, that is less the case.”

Home market

Indeed, while the Topix has gained 9.2% over the last six months alone, according to FE Fundinfo data, the FTSE 100 has achieved less than one quarter of these gains over the same time frame, at just 1.3%. It has also achieved less than half of the gains of the MSCI All-Country World index over the last five and 10 years. Does the UK market present a value opportunity?

“I’m afraid it will still be a case of ‘wait and see’ for the UK. There is a lot of hope that this is the home of industrial revolution; that we can get back to business and back to clarity. But the business and markets have become so intertwined with politics that there is risk,” Baroness Moyo says.

See also: Facing the inflation dilemma head on

“It is at the point with politics where business has not been able to work without a political overhang creating costs from a regulatory perspective, and from a risk mitigation attitude when it comes to investing.

“In the US, if I talk about AI or the energy transition, the first question people will ask me is how much money they could make if they invest $1 – what return would this generate? When I have the same conversation in Europe, the first question is how to mitigate any risks coming from those themes.

“Our only way out of this is to find some kind of balance between these two attitudes. I’m worried that a lot of conversation in the UK is still very top down and government led, where people would rather kill off investing in certain areas, rather than use innovation to solve any issues.”

Emerging markets

Baroness Moyo is also reticent to invest in emerging market equities, arguing there are other areas where investors can generate “considerable returns, above the cost of capital, without the inherent risk”.

“I understand the arguments on paper. The macroeconomic arguments are very compelling. But as a practical matter, life is too short,” she says. “It sounds flippant, but it’s fundamentally true. Investors only have a certain number of years to make returns. That doesn’t mean they can’t ultimately achieve gains and compound those returns. But why take the risk by putting your capital in a market with slowing growth geopolitical risks and FX problems? It’s very hard.

“In my case, I only have 20 years to compound any returns. Why would I waste my time trying to work my money in an uncertain environment? Yes there could be some outside bets but I am willing to leave that money on the table.”

See also: Top five investment themes to look out for in India in 2024

She cites India as an example which is popular among investors. According to FE Fundinfo, the MSCI India index has returned 26.3% over the last year – more than double that of the MSCI ACWI.

“Lots of people say they are going to make billions by investing in India. Good luck to you, but I am willing to reduce my basis-point returns and not have to deal with the risk,” she reasons.

“Would I ever say India is never going to make it? No, it’s not my place to say that. But what I will say is it is extremely difficult to generate predictable returns in that kind of environment. There is a lot of red tape; it is definitely skewed towards locals winning over the foreign partner. It doesn’t have a great track record.

“People have to understand it’s not free money; there are other places you can invest and generate returns with relatively little risk.”

This article was written for our sister title Portfolio Adviser

Researchers at the firm noted in the report titled ‘Multi-Asset Investing: A Difficult Sport’ that many multi-asset funds have struggled to beat their benchmarks in recent times.

They noted the average ‘moderate’ global allocation Morningstar category fund trailed the euro moderate global target allocation index by 2.19% annualised over the past 10 years.

See also: It’s time for multi-asset managers to ditch bond proxies

The lure of the balanced portfolio has been its ability to limit losses in challenging stock markets through bonds’ negative correlation, the report noted. But in 2022, both stocks and bonds lost ground.

This led some to suggest the 60% equities, 40% bonds portfolio is past its due date, Morningstar said. The stock/bond correlation changes through time and, besides correlations, valuations matter. At the start of 2024, the bond market has been repriced and is now offering some of the highest yields seen for a long time.

Thomas De fauw, senior manager research analyst, and author of the report, said: “Strategic asset allocation is the main driver of a portfolio’s return and explains a great deal of the excess performance versus the benchmark. Looking at the European multi-asset universe we see a broad range of allocations in each of our categories.

See also: Chancery Lane CEO: Modern portfolio theory doesn’t work for income investors

“But benchmarking a multi-asset strategy differs substantively from a strategy focused on a single asset class as the many dimensions of multi-asset strategies complicate the analysis. Moreover, for objectives-oriented funds, such as multi-asset income or environmental, social, and governance-focused funds, there’s a specific investment outcome to consider.

“All the work that goes into achieving those goals is not always captured through benchmark-relative performance, nor is it always clear which benchmark to choose,” he added.

See also: Premier Miton’s David Jane: Reframing income as an output rather than a style

The app is now accessible to all Intelliflo customers as an integrated feature.

Mabel is a new data and intelligence business, launched last month by former Atomos distribution head Lawrence Cook.

It provides information and analysis on model portfolio service (MPS) and multi-asset funds from more than 80 discretionary fund managers. This covers over 1,000 MPS offerings, all of which are risk-rated by Mabel.

Cook said: “It makes perfect sense to make our data available through the leading practice management provider Intelliflo. By facilitating a free two-way flow of data, we will make advisers’ lives easier. The ability to re-use data rather than re-key has to be the way forward, and this development, we believe, will be well received by users.

See also: The Lang Cat: Advised platforms suffer record outflows in 2023

“To date, access to information for advisers has been piecemeal, and research tells us that the adoption of MPS by advisers is increasing across the UK,” he added.

“We felt the time was right to provide a service that really delivers what advisers need, and our early adopters in trials have given us great feedback, which tells us we are delivering exactly that.”

Nick Eatock, CEO of Intelliflo, said: “We’re delighted to offer new capabilities to our customers, and the Mabel Insights app provides advisers with comprehensive and intuitive access to MPS information from across the market.”