A next generation “Great Investor,” First Eagle Global Fund’s Matthew McLennan. First Eagle is known for its value-oriented, margin of safety approach and making preservation of capital its first investment goal. McLennan assumed the role of Portfolio Manager of the First Eagle Global Fund in late 2008 from investment legend, Jean-Marie Eveillard. The now $50 billion plus fund is rated four- star by Morningstar. Over the last five years, with McLennan on board, it is ranked in the top ten percent of its world allocation category. McLennan explains why he is currently finding markets around the world expensive, and why “patience” is his best investment idea.
This week on WEALTHTRACK, why First Eagle Global fund’s Matthew McLennan is counseling patience as his favorite investment theme in this expensive and rapidly changing world. Next generation Great Investor Matthew Mclennan is next on Consuelo Mack WEALTHTRACK.
Hello and welcome to this edition of WEALTHTRACK, I’m Consuelo Mack. A viewer recently wrote us and asked how many of our last four WEALTHTRACK guests were bullish, the inference being they all were.
Until now we really haven’t been counting, but we looked back and found that the last outright bull on WEALTHTRACK was back in October when Francois Trahan, Chief Investment Strategist at Cornerstone Macro was on. He and his firm are bullish on the U.S. economy and U.S. stock markets because of many factors, including the steady nature of our economic recovery, the revolution in oil and gas production and our manufacturing renaissance.
For the record this week’s guest is not in the bullish camp.
Matthew McLennan is head of First Eagle Investment Management’s Global Value Team, and Co-Portfolio Manager of its flagship First Eagle Global fund, a position he assumed in late 2008 from investment legend, Jean-Marie Eveillard.
The now $50 billion plus fund is rated 4-star by Morningstar and over the last five years, with McLennan on board is ranked in the top ten percent of its world allocation category.
First Eagle is known for its value-oriented, margin of safety approach and making preservation of capital its first investment goal. As McLennan’s team put it in a recent letter to clients, “we always keep a watchful eye on what can go wrong, not what is going right.”
What can go wrong?
McLennan is monitoring a long list of potential problems including the unprecedented easing policies by central banks around the world, which are keeping interest rates at historic lows, known as financial repression…
The simultaneous record breaking rise in government debt in the U.S. and much of the developed world. The convergence of rising incomes and demand from emerging markets with slowing income gains and increasing income disparity in developed ones. And then there are the geopolitical flare-ups: tensions in Ukraine, the rise of ISIS, China’s economic and military aggression.
What’s at the top of McLennan’s “what could go wrong list” and how is it affecting his investment outlook and strategy? We asked him.
MATTHEW MCLENNAN: well, you know, at First Eagle, we’re always worried about what can go wrong. We see our primary goal being to preserve capital in real terms, and when we look out at the world today, we worry about the scope for both repression and aggression. And when I talk about repression, I’m talking about financial repression. And the root cause of that is too much debt. You know, if we look at the household sector, the corporate sector, and the government sector, and we add that together, we actually have higher debt levels relative to GDP today than we did before the crisis in 2007, so we haven’t deleveraged. The reason interest rates are low is that policymakers need to keep them low to help solve the excess debt.