Schroders chief says ‘arms-length’ algorithmic management won’t provide answers to coronavirus

Peter Harrison has urged asset managers to open dialogue with struggling companies, as ‘creative’ solutions to coronavirus events will only be found through human interaction.

As the coronavirus pandemic threatens the survival of businesses globally, solutions for the buy-side will not be found in passive or algorithmic investment management, the group chief executive of Schroders has said.

Peter Harrison gave the stark warning to the asset management community amid the ongoing coronavirus pandemic, stressing that real-world solutions can only be reached with human interaction and not mechanised, passive, or algorithmic strategies.

“I would encourage companies to talk to us,” Harrison said. “I have also asked our portfolio managers to open these critical conversations with companies as we attempt to identify the most pressing challenges. We will talk, individual to individual, to solve them. I have no doubt that some of those solutions will be highly creative; they will only be reached with this sort of human interaction.

“In contrast, the shortcomings of mechanised trading will come into sharper focus. The answers will not be conjured up by arms-length algorithmic investment management.”

Portfolio managers at Schroders have been instructed to open dialogue with companies, with Harrison adding that fund managers could help the crisis by having open and honest conversations with management teams on the problems they are facing, to seek ‘inventive’ solutions.

Fund managers must also focus on the long-term, Harrison said, and reject short-term opportunities to capitalise on price distress, and throw support fully behind companies with long-term prospects.

“Despite the intensity of events in the here and now, this is the time for long-termism. Schroders has survived many market crises over its 216-year history by following that philosophy. Our responsibility today is to ensure industries are supported, that they aren’t engulfed by short-term turbulence. Long-termism must win out,” Harrison concluded.