27 Jul 2020 | 02.25 pm
Interview: Donough Kilmurray, Davy
'People need to think about their growth assets and the safe assets'
27 Jul 2020 | 02.25 pm
Davy wealth manager Donough Kilmurray (pictured) says deciding on what you want to own is more important than when you buy it
Davy Group is Ireland’s leading provider of wealth management, asset management, capital markets and financial advisory services. The business split is c.56% discretionary and 44% advisory, so there’s a big responsibility on Donough Kilmurray to make the rights calls for clients.
Kilmurray is Davy’s chief investment officer, and his career has taken him from academia mathematics through to spells with Goldman Sachs in New York and London, where he honed his wealth management skills. He has overall responsibility for Davy’s wealth management portfolios, encompassing asset allocation, manager selection and portfolio construction.
These functions existed before Kilmurray’s arrival on Dawson Street. “Davy has always had smart guys on the strategy side and teams for selecting funds and managers, and portfolio construction,” he explains. “Part of my role is to bring everything onto the same page. The trickier aspect is looking at the market and trying to figure out where we’re going, and then bringing people with us.”
With discretionary clients, Davy is in control of where the clients’ money goes. Parameters vary, depending on the client type. A charity or pension fund may be more cautious than the funds owned by an entrepreneur.
“With every client, our first job is to do a financial plan to determine what their needs are. Then we will suggest the allocation and discuss the attendant risk. Some people will say I like property or I don’t like something else, and that will shape the allocation. That’s the decision on what to own. The next decision is the allocation timing, which is where people can get bogged down.
“The decision around strategic allocation – what you want to own – is by far the most important one. I always tell people that strategic allocation is the cake and tactical allocation is the icing. The cake is far more important than the icing but many people are sidetracked by the tactical part.”
Due to Covid-19, the year to date has been marked by extreme stock market volatility. Kilmurray quotes Lenin when observing that there are decades where nothing happens and there are weeks where decades happen.
“This year there has been a wake-up call from two directions. There was the equities sell-off in March, while cash rates and cash rates are going negative. People need to think about their growth assets and the safe assets. When clients ask us what they should do, we come back to their plan and how soon they want to reach their objective.
“Once you have that plan then we start taking steps towards it. As much as the market was offering quite cheap prices in March, we didn’t advise clients to go all-in because we didn’t know how bad it might become.
“We made three steps through March to increase global equities and scaled back in May, not because we think there’s a crash coming but because we think the value opportunity for the broad market has diminished.”
More generally, Kilmurray notes that investor equity allocations in a crisis has changed over the years, and that technology is now viewed as more defensive than cyclical. “The big technology companies have large balance sheets and generate much more cashflow than the last crisis,” he notes. “Technology is still the future because of the way society is changing after the pandemic.”
Irish equities trade at a discount to European and US peers, and Kilmurray’s view is that global fund managers still recall the economic meltdown in Ireland more than a decade ago.
“Although Ireland is a very different country now, they might be less inclined to make the same bet in an Irish company as they would in a Swiss or UK company. Irish people know the companies better, and feel more comfortable about buying Irish stocks.”