Controlling the controllables

Read this article to understand:

• The importance of focusing on the controllables to invest through the noise
• Why it boils down to thoughtful analysis, robust portfolio construction and proactive risk management
• How this focus can help manage uncertainty, but also uncover opportunities

We are constantly bombarded with news headlines and in 2025 – whether about tariffs, geopolitics or tech – they’ve been coming thick and fast. And that’s on top of the usual reports of macro data and company results. In my 20 years in the asset management industry, I’ve never seen a time where investors have had to process such a volume of noise.

As fund managers, we’re also expected to have an opinion about it all. I get asked a lot of questions about the news. Where are interest rates heading? What’s President Trump’s “Big, beautiful bill” going to look like? What would happen if a Federal Reserve governor were replaced? While it’s fun to speculate, trying to predict the outcomes is nigh-on impossible.

Six months after “Liberation Day”, the global tariff imposed by the US is expected to settle at around 15 per cent, the highest in nearly a century. Yet US equity markets are 18 per cent higher than on the eve of the announcement (see Figure 1). No one would have predicted that at the time. And surprises like this have happened again and again, from Covid-19 to Russia’s full-scale invasion of Ukraine. It makes a mockery of trying to forecast what might happen.

The reality is that most of this is out of our control. In my years as a portfolio manager, I’ve learnt that what’s important to understand and focus on is what is within my control. For investors, that means understanding companies and their respective industries better, following a consistent process, building resilient portfolios, and managing risk proactively.

Healthcare: A case study in noise management

There have certainly been sectors where headlines have had a significant impact. Healthcare is an obvious example. President Trump’s “Most Favoured Nation” policy is impacting pharma companies, and proposed cuts to healthcare exchanges such as Medicaid are affecting health insurers (see Figure 2).¹ But the reality is we don’t how much of this will eventually get implemented..

From a portfolio manager’s perspective, what we can do from a sector standpoint is diversify our exposure. It’s not easy to do, but there are ways to mitigate some of the policy noise. For example, we look for areas in other parts of the healthcare complex that might not be as impacted by the headlines, like healthcare facilities. We invest in companies such as HCA Healthcare, which is the biggest hospital operator in the US; and Fresenius, which is a major hospital operator in Germany and Spain.² Tariffs and other proposed policies such as Most Favoured Nation prescription drug pricing have little to no impact on these companies.

Medical device companies are also relatively insulated from changes in policy. Often, their products are critical when it comes to treating areas such as cardiovascular health and diabetes. In some cases, like Abbott Laboratories for example, they are also diversified across other areas such as diagnostics and nutrition.

Building resilience

Our investment horizon tends to be longer-term in nature (in many cases over three years and beyond), and part of managing a portfolio is to look through the short-term noise. But it can be tricky, as some events like tariffs or regulation could have a significant impact even over longer timeframes. Share prices also move to reflect the fact there might be a longer-term issue in a certain industry or business, and that can’t be ignored.

But investors can try and find ways to insulate portfolios because, ultimately, you don’t want your portfolio driven by noise. You want it to be driven by the underlying fundamentals of companies, such as their cash flows and earnings. This is where fundamental research and analysis can help insulate portfolios from noise while staying invested in resilient businesses.

Understanding how to build this resilience within portfolios is also crucial. The noise isn’t going away anytime soon, so investors need to have some idea of how they’re going to navigate it.

We have a dedicated portfolio construction specialist on the equity team, who doesn’t spend all day looking at companies. He sees the headlines, of course, but he can largely ignore them, as his job is to just think about how to build portfolios to deliver as robust a performance as possible, accounting for the wide possible range of outcomes. Although we’ve always had a focus on portfolio construction, that gives us a refreshing take and adds further value.

Managing risk proactively

As we’ve seen with healthcare, diversification within sectors is important, especially since we’re seeing individual companies getting impacted. And as I discussed a few months ago, it’s also important across sectors (see Slow and steady wins the race).³

The environment is becoming less stable and predictable than it has been over the last several years. For instance, the Supreme Court could throw out all of President Trump’s recent tariffs, right after companies have tried to adjust their business models and operations. Diversification is another way to try and offset all that noise.

It’s important from a geographical standpoint as well, to spread portfolio exposure across regions. Investors who fear US trade policy is going in the wrong direction will be mindful about not concentrating their portfolio too much in the US, in contrast with global benchmarks that currently have nearly two-thirds in US exposure.

For example, we’ve added some Japanese companies to our portfolios in recent months. A lot of investors have been getting excited about Japan coming out of decades of deflation. But beyond that, there is a particularly interesting narrative around the newfound shareholder-friendliness of Japanese companies. They are finally taking a leaf out of the US playbook and focusing more on deploying capital efficiently and delivering a better return on capital – either organically or through share buybacks.

This change of mindset on capital allocation is evolving, and we’ve been picking up on it with certain companies. Our research on Japan is an ongoing process, but we’re seeing some promising names coming through..

Across our global equity strategies, we tend to hold 40 to 60 stocks per portfolio, and we have been quite proactive in the portfolios against this backdrop of headline risk. As a result, they tend to be reasonably diversified across regions and sectors. That’s something we focus on within our portfolio construction process.

Looking ahead

As Warren Buffet famously said: “Be fearful when others are greedy, and greedy when others are fearful.” Sometimes, the headlines drive fear, and that can uncover opportunities. There may also be potential to be proactive where we feel the noise is leading to an overly fearful reaction.

That means there are two ways of thinking about the noise. One is the need to insulate against it through research, diversification and building robust portfolios. And the other is that noise will create opportunities – and the same processes can help investors find them.

The noise isn’t going away; if anything, it’s becoming the new normal. But by controlling the controllables, investors can navigate it with greater clarity and confidence.