What’s keeping fund managers up at night?

With Halloween upon us, we asked a few fund managers what’s “keeping them up at night” right now and, more importantly, whether investors should be afraid. It turns out, while there are a few things that go bump in the night, there’s also plenty of reasons to stay calm.

A budget fright

For Alan Dobbie, co-manager of the Rathbone Income fund, the biggest source of tension isn’t ghosts or ghouls, it’s the upcoming Budget. “There’s a lot around the Budget,” he admitted. “Rachel Reeves has a couple of options. She can either stick to the manifesto promises and make some spending cuts or tax rises — or she can go for something bigger, real tax reform.” 

Whichever route the new Chancellor takes, the implications for markets could be significant. But Alan believes this particular fright might lead to a positive surprise. “There’s short-term uncertainty, but it could be long-term positive and some investors are already starting to look through that,” he said. In his own fund he’s been quietly increasing exposure to mid-caps, a move that might seem counterintuitive given their domestic focus. But sometimes the scariest-looking areas of the market turn out to be the most rewarding.

Read more about the opportunities in the mid-cap market

Emerging markets: where the real monsters lurk

When it comes to emerging markets, Anthony Kettle, manager of BlueBay Emerging Market Unconstrained Bond, admits that there have been a few hair-raising moments in recent years. “We’ve seen quite a lot of defaults in emerging markets over the past few years,” he said, “but it’s also created a stronger base.”

That’s the thing about market shocks: they often clear out the weakest links, leaving healthier opportunities behind. Today, Anthony believes emerging markets are on firmer footing, helped by a trend that might just make investors breathe easier — a weakening US dollar.

Still, he keeps a wary eye on one spectre that refuses to die: inflation. “If we get a big re-acceleration of US inflation and the Fed has to be more hawkish, that could hit emerging markets,” he said. “And geopolitics is another — with tensions between the US, Russia, and China still playing out.” But despite the risks, Anthony believes the key is risk management, not retreat. You can’t avoid every scare, but you can make sure your portfolio isn’t caught in the dark.

A European twist in the tale

For Jason Pidcock, manager of the Jupiter Asian Income fund, the biggest fright isn’t coming from Asia — it’s from Europe. “One risk for global markets, which would impact Asia as well, is France,” he explained. “France is in a very tedious financial state, and there’s a risk it could kick off a global credit crunch. It’s not our base case, but it’s certainly a risk.”

Longer term, Jason’s fears become more existential. “At some point over the next 20 years, we have to assume there’ll be some kind of environmental catastrophe so bad that it impacts the global economy,” he said. “And there are always black swan events — things we can’t foresee.” That’s why his focus is on building a resilient portfolio, one that can withstand whatever the next shock might be. 

Don’t fear the dark

If there’s one thing all three managers agree on, it’s that fear is part of investing, but it shouldn’t be the driving force. Markets have always faced uncertainty, from political upheaval to inflation scares and unexpected global events.

History shows that these moments, while unnerving, often create opportunities for disciplined investors. As Alan, Anthony, and Jason each remind us, the best defence isn’t panic, it’s perspective.

So this Halloween, when headlines seem a little frightening, remember: even the scariest markets eventually calm down. Keep your nerve, stay diversified, and don’t let the ghosts of volatility chase you away from long-term opportunities.