Why being different can be your greatest strength

It goes without saying that Clare Coleman has big shoes to fill. Having been promoted to co-portfolio manager of Fidelity's Australian Opportunities Fund back in June 2022, Coleman, along with her colleague Casey McLean, are out to continue the work (and deliver the returns) established by Kate Howitt during her 18-year tenure at Fidelity. 

During this time, Howitt nabbed a ranking in Citywire's top 30 female fund managers in the world, not once, but four years in a row. She was also the only Australian fund manager to achieve this ranking. 

But as one great retires, a new talent rises to the challenge. And Coleman believes her differences, namely, being a woman, actually offer her an advantage. 

"In a two-week management roadshow, a company is probably more likely to remember the one Clare they met versus the 20 Peters, so it can be beneficial in building stronger relationships and networks," she says. 

In this wire, Coleman shares why, through a combination of hard work and perseverance, any emerging female talent should feel they have as good an opportunity to succeed as anyone. 

She also shares how the industry can better attract and retain top female talent, her outlook on the market over the year ahead, as well as the sectors that are worthy of a deeper look in a volatile market environment. 

As part of Livewire's International Women's Day coverage, we are profiling 12 establishing and up-and-coming leaders within Australian funds management. Beyond this week, we are committed to showcasing more female talent in our content in the future. We wholeheartedly believe the status quo isn't good enough. 

• Name: Clare Coleman
• Firm: Fidelity International
• Years in the industry: 10 years
• Speciality: Long Australian equities 
• Biggest personal portfolio holding: Liquidated when joining Fidelity
• One thing very few people know about you: I love interior design
• Your guilty secret TV or reading pleasure: As a new Mum, my viewing/reading habits have been totally upended so the Lion King, Miss Rachel and Frozen are all on high rotation in our house.   

On burnout, perseverance and standing out from the pack 

Coleman feels fortunate that she hasn't faced huge obstacles during her decade in investment management. Having started out her career in equities research at Merrill Lynch, and later, moving to Morgan Stanley to work in investment banking, it became clear that she wanted to be closer to investment decisions. 

So, she joined First State Super (now Aware Super) in her first buy-side role in their internalised direct equities portfolio, covering technology, media and telecom, gaming and consumer stocks. In 2019, she nabbed a role with Fidelity, originally as an analyst, and then as an assistant portfolio manager under Kate Howitt on the Australian Opportunities Fund. 

Today, she works on the team as a combined analyst and co-portfolio manager on the Australian Opportunities Fund alongside Casey McLean.

"I have definitely fallen victim to burning myself out, working too hard at times, but I think that is an easy trap for any young analyst to fall into, both male and female," she says. 

"Through a combination of a lot of hard work and perseverance, I think any emerging female talent should feel they have as good an opportunity to succeed as anyone." 

Coleman believes emerging talent should not see gender as something which will factor into the equation of their success. Instead, they should just focus on delivering results - which will ultimately be recognised and rewarded by senior team members. 

"Early on, it is obviously important to work hard and get the basics right, but also invest in yourself - read broadly, hone your skills in any areas which might be lacking and build your confidence," Coleman says. 

That said, strong relationships are key. 

"I would also recommend anyone starting out to also invest a lot of time in building strong relationships - across company management, buy-side and sell-side analysts and external networks," Coleman says. 

"Being good at this job is as much about relationships and the EQ side of the equation as it is about IQ." 

In fact, being a woman in a sea of men can also play to your advantage. 

"In a two-week management roadshow, a company is probably more likely to remember the one Clare they met versus the 20 Peters, so it can be beneficial in building stronger relationships and networks," she says. 

How the industry can attract and retain female talent 

When it comes down to it, attracting and retaining female talent all comes down to flexibility, Coleman says. 

The importance of mentors 

At the core of Coleman's investment philosophy is finding quality companies that create value. She notes these companies should be in or approaching a sustainable earnings upgrade cycle and should be reasonably priced for the growth that they offer.

It's a philosophy that has been shaped by some fantastic mentors along the way, including Tim Riordan, the first portfolio manager Coleman worked with on the buy-side, and Kate Howitt at Fidelity. 

"At First State, we were very much focused on finding quality businesses to own for the long-term," she explains. 

"However, Tim also sharpened my focus as an analyst on the importance of loss avoidance and earnings momentum - the best long-term idea can quickly be one of the worst if consensus is too optimistic in the short term. So finding those compelling long-term ideas which also carry low earnings risks or are entering an earnings upgrade cycle was a big emphasis in the process." 

Coleman also notes she was fortunate to work alongside one of the industry's great female investors, Kate Howitt, before she retired. 

"As my first foray into portfolio management, Kate taught me a lot about portfolio construction and risk management," she says. 

"Kate continues to be such an important mentor for me both professionally and personally as I navigated the transition to motherhood and all the added juggles involved as well." 

Investors should expect continued volatility ahead

Coleman remains cautious on markets over the year ahead, and while she expects continued volatility throughout the course of the year, she believes this very volatility will throw up some interesting opportunities. 

"Interest rates are at the highest level in a decade, however, consumers are still spending, unemployment remains close to historic lows and inflation remains fairly sticky," she says. 

"Against this backdrop, we are still quite some way away from an easing in monetary policy and equities will continue to be challenged." 

This is particularly true considering the large proportion of fixed rate mortgages and high savings rates that have so far cushioned Australia against the full blow of the RBA's painful rate hikes over the past year. 

"As Australia rolls through the fixed rate mortgage cliff this year, the impact should begin to be more universally experienced and the consumer discretionary space is the most vulnerable," Coleman says.  

"Nearly a quarter of mortgages are to be refinanced by the end of 2023, with two-thirds of fixed rate loans due to expire this year." 

And cracks have already started to emerge. 

She points to retailers with any exposure to housing as an area to avoid. 

"Consumer earnings bottom with an approximately 12-18-month lag from the bottom in consumer sentiment and many consumer discretionary stocks don’t look to be fully pricing in this reality," Coleman says. 

In addition, the banks also look too expensive given the challenging macro backdrop, she adds. 

"The impact of higher lending rates, refinancing of low fixed rate loans, and negative real wage growth are all factors that are likely to curtail Australian household activity - which is among the most over-geared in the world and drives more churn and competition in the mortgage market," Coleman explains. 

"Coupled with slowing loan growth is an increasingly competitive refinancing and deposit market, all of which will put pressure on NIMs and returns from here." 

So where is Coleman finding opportunities? 

Unfortunately, there is no one sector that is currently screamingly cheap. Instead, Coleman believes it's very much a bottom-up stock pickers market. 

"We prefer insurers to the banks at this point in the cycle as they benefit from high premium growth and interest rate leverage while also trading at inexpensive valuations," she says. 

"Beyond this, there are some compelling opportunities emerging where earnings risks are more benign or where stocks are trading at or close to their bear case valuation." 

She reveals that Fidelity is starting to do more work on cyclical stocks that have led us on the way down. 

"These will start to become increasingly appealing as they likely lead us on the way out," she says. 

In addition, some of the long-duration growth stocks which have been hit hard are beginning to trade on more sensible multiples for the visible growth runway on offer, Coleman adds.  

"The market is more short-term focused than ever right now and the best time to buy a long-term compounder is during a cyclical downturn, so some of these high-quality businesses with long-term structural growth and genuine pricing power are increasingly appealing as valuations correct," she says. 

While tech is no longer the darling it once was, profitable tech businesses are now worthy of a look in. 

"[Tech companies that] can still sustainably compound 20-30%+ earnings growth through a downturn are attractive and will be increasingly so once we reach the point of peak interest rates," Coleman adds.