For many investors, the market volatility we have recently seen in the S&P/ASX 200 Index (ASX: XJO) was probably quite a scary time. It can be jarring (to say the least) watching the value of your invested capital (which might consist of years' worth of savings) violently fluctuate in a very short space of time.
But for one ASX fund manager, the story is quite different.
According to reporting in the Australian Financial Review (AFR), Rob Adams, the chief executive of fund manager Perpetual Limited (ASX: PPT) reckons his portfolio managers are "as happy as I have ever seen" as a result of the cheap prices they are finding in the current environment. Perpetual has been struggling in recent years as the fund's 'value investing' philosophy was left behind by the rampaging bull market we saw in 2018 and 2019.
But now the tables have decisively turned, and Perpetual sees big opportunities in front of it.
"This is the sort of period we need to see," the AFR quoted Mr Adams as stating.
"For the first time in many years, our portfolio managers are buying quality stocks at reasonable prices that in some cases for years they haven't been able to buy. They are as happy as I have ever seen them and that is because they are setting up their portfolios for future success.
It's this sort of period of time historically over 20 to 30 years that Perpetual Investments has added value… We saw it in the GFC, we saw it in the tech bubble, we saw it the 1987 crash."
Adams did acknowledge that "one swallow doesn't make a summer" but added that "active management shines in these markets and value should shine even more… (in contrast) with an index you are buying the good, the bad and the ugly."
Can we learn anything from this attitude?
Indeed we can, in my view! Periods of market volatility can be mentally difficult to endure, but they also can give us the best chances (sometimes 'once-in-a-lifetime') to build long-term wealth. That's how Warren Buffett has used market crashes before to increase his company's wealth and I think we could do well to follow his example.
A caveat though: it's the 'throwing the baby out with the bathwater' opportunities you want to look out for, not the water itself. A recession can help the best companies become stronger, but it can also mean devastation for companies not strong enough to withstand the pressure. Make sure you find the babies and not the water to invest in when times are tough!
