Trader profile: Lessons from history key for Man Investments director

Suk Inthirarajah reveals his investment focus and the best and worst investments he has been involved in.

Suk Inthirarajah, director of Middle East sales for Man Investments Middle East. Reem Mohammed / The National

Name: Suk Inthirarajah

Position: Director at Man Investments Middle East

Years with the company: 10

Based: Dubai

What is the asset class and geography you are focused on?

Man Group offers two main investment management styles – systematic quantitative and discretionary. I’m focused on the systematic quantitative trading division. The flagship programme in this division, AHL Diversified, seeks to profit from trends in markets globally using historic price information to forecast future price trends. Put simply, it builds long positions in a rising market or short positions in a falling market. The strategy is not focused on any asset class or geography as such. The only constraint that applies is that the market must offer deep liquidity. A key philosophy underlying the strategy is diversification, which is achieved by trading in about 400 highly liquid markets across equity, fixed income, credit, commodities and currency.

What is the outlook for the medium term in your opinion?

Policymakers have taken unprecedented measures to stimulate growth. Quantitative easing and a sustained period of record low interest rates have led to a surge in equity prices in most developed markets, tighter credit spreads, and low yields. To put this into perspective, the S&P has tripled over the past six years. More recently we have seen a divergence in economic output, and central banks are no longer acting in tandem. The United States is in a relatively strong position. The euro zone is flatlining. China is slowing down while Japan is in recession. In this region, the slide in oil price in response to excess supply and falling global growth has investors in a panic, possibly because of concern over the knock-on effect on government spending plans. Over the medium term I see these trends persisting. Divergence between global economies will continue. Opec’s determination to maintain oil production output and the fight for market share will likely see oil prices continue to fall.

What are the main risks, either upside or downside, to the outlook?

The main risk on the downside is that consensus trading continues to build and then unravels suddenly. This could lead to a significant overreaction by investors. On the upside, shale producers could start to exit the market. If this happens, supply will start to fall back in line with demand and oil prices should begin to rise. Some local equities in the GCC have fallen to levels that are not justified by either their earnings or prospects, and this could provide a good entry point.

What is the best investment at the moment?

It really depends on individual goals and risk appetite. In my time covering the region I have observed that investors here have generally had a propensity to invest in equity, credit and real estate. For investors holding such portfolios, we believe the best investment is something complementary rather than adding more of the same. This means the investment should be liquid and provide portfolio diversification.

What was the best investment you have been involved in?

The best investment I have been involved in was when we were able to generate what we call crisis alpha – strong positive returns when equity markets were in meltdown – during the sub-prime crisis. Trend followers like us generate crisis alpha by going long on highly liquid flight-to-quality assets and shorting liquid futures on major equity markets that investors scramble to exit. In fact, on average, trend followers delivered crisis alpha in the last three major equity drawdowns that I have witnessed – the subprime-triggered financial crisis, the dotcom crash and the Russian and Long-Term Capital Management collapse in 1998.

What was the worst?

It would have to be a personal account investment I made in March 2000. I was at Cass Business School and got caught up in the frenzy around technology initial public offerings. My peers were subscribing for IPOs with astronomical (20 per cent plus year-on-year) growth expectations during what everyone believed was the dawn of a new era for internet and technology companies. I was proud of my initial restraint, given my discomfort with analyst valuations, but soon gave in. My timing could not have been worse with my application to subscribe for shares in lastminute.com. After two days of positive trading, the lastminute.com IPO was to go down in history as one of the biggest technology IPO failures of all time. This was my first practical lesson in being caught in a consensus trade and bubble formation. I was lucky the IPO was significantly oversubscribed, as it meant I received a relatively small allocation and avoided a first-hand lesson in concentration risk.

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