After spending 21 years as CIO at Fulcrum Asset Management, Suhail Shaikh is accustomed to the dynamics of different regimes. Over this time Fulcrum has transitioned from a large macro fund to a multi-investment platform spanning different asset classes. This move has been deliberate and reflective of how Suhail now views the market environment.
“Before and during the GFC, we got through getting the big things right. We still try and do that, but I realised that it’s not actually a very robust strategy. You need lots of bread-and-butter ways to make returns. And that bread-and-butter return generation is not just about getting the big things right, now we’ve diversified into commodities, into thematic market neutral equities, into dispersion, into quant.”
One of the key points of Fulcrum’s gradual asset diversification has been the shift toward commodities. Suhail notes that commodities had been “forgotten about” with their close correlation to equities, the asset class was stiff and didn’t generate returns. Commodities now offer opportunities on both the downside and the upside; Suhail believes that with a broader environment that is akin to the ‘70s, where oil shocks reverberate across global markets, commodities are a fantastic diversifier within portfolios. This is appealing to investors in “Australia, Singapore and the US”. Investing in a large macro fund such as Fulcrum allows investors a gradual exposure to commodities, as the fund decides when and where to size positions, instead of pledging capital to a purely commodities-based fund.
Another area that Fulcrum has diversified into is illiquids. Because of their long-duration strategies and potential illiquidity premium, they can offer significant returns within a portfolio. Suhail believes this pivot is necessary because of how “efficient” liquid markets have become; as a result, exploring these opportunities has become a core part of the firm’s approach.
This broader diversification aligns with the complex environment hedge funds face today. Structural shifts such as de-globalisation and supply chain disruptions are core trends that are disrupting the global order and creating volatile shocks across the market. Suhail notes that this creates a great opportunity for a fund like Fulcrum but cautions against how these feed into investment models. “It’s about risk management, having balance in the portfolio and not getting greedy. Trading alpha has been super important and not getting carried away with individual high conviction ideas has also been very crucial to generating returns.”
Our latest Alternative Views episode with Suhail Shaikh, CIO of Fulcrum Asset Management.