Over its financial year, which runs to the end of April 2023, Monks’ share price declined by 7% versus a rise of 3.2% for its FTSE World Index. The fund managers, Spencer Adair and Malcolm MacColl, acknowledged that they have “made mistakes”, which led to the changes. Monks, one of many investment trusts in Baillie Gifford’s stable investing in quality growth stocks, said in response to its disappointing performance that it has taken action to reposition its portfolio by reducing exposure to its highest-risk stocks, which it labels ‘rapid growth’. When issuing financial results this week, both trusts referenced rising interest rates as a dominate theme impacting stock markets. Two examples of the many investment trusts that construct portfolios on a bottom-up basis are Monks (LSE:MNKS) and Montanaro UK Smaller Companies (LSE:MTU). However, over shorter time periods, macro headwinds can prove to be a painful and sobering experience, as the past 18 months has shown as interest rates increased from 0.1% to 5%. Those who focus on the micro rather than the macro point out that over the long term it is the former that is the biggest driver of returns. Invest with ii: Buy Investment Trusts | Top UK Shares | Open a Trading Account.Interest rates influence the “risk-free” rate, which is important for the way a stock is valued. After all, it seems hard to ignore how interest rate rises impact companies. ![]() ![]() In reality, most fund managers pick stocks first and foremost, but consider the wider economic backdrop. Those who describe themselves as top-down investors factor in the big picture, examining wider economic trends, while a bottom-up investor ignores the so-called macro and focuses specifically on the fundamentals of a business. In fund management lingo, ‘ top-down ’ and ‘ bottom-up ’ are used by fund managers in everyday conversation to explain how they pick shares when building a portfolio. First and foremost fund managers pick stocks, but at times the macro proves to be too much of a headwind.
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