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Edition 7 - People

The quiet chaser

The curiosity and confidence which drove Dermot Ryan to work, live and study around the world drives his day-to-day fixation and fascination on markets and investing.

In Ireland, it’s a ritual that’s been going on for centuries. If you lie face up, and stretch your neck to, literally, kiss a chunk of limestone built into Blarney Castle in southern Ireland, you will be blessed with the ability to speak eloquently, and persuasively. Or at least that’s what the mythology claims.

Dermot Ryan grew up a little more than an hour’s drive north of Blarney Castle. And he has a touch of the Blarney about him. He is a journalist’s friend, able to speak confidently and intelligently about stocks, fixed income markets, macroeconomics and all things that affect financial markets.

Ryan isn’t loud but sounds confident, and determined, aided in no small part by his strong Irish accent.

“I’m really fascinated by markets,” he explains about his job as co-portfolio manager. “I like to invest where I see opportunities. I think there’s a very interesting confluence of forces coming through in Australia at the moment given the very long period of economic expansion. I think Australian equities are one of the few asset classes in the market that still provide a strong income that’s comparable to their history.

“For the rest of this cycle there’s a big opportunity in equities as (fixed income) yields compress. There’s an opportunity to get some good defensive yield from Australian equities,” he says.

Ryan was born in Australia but moved to Ireland when he was three. He went to school and university in the Emerald Isle, played lots of rugby, and ended up graduating with a degree in actuarial finance from University College, Dublin.

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“I came back to Australia when I was 21 in 2004, more as a curiosity and just kind of fell in love with Sydney,” he says at an outdoor café with views onto the famous Harbour. “I wanted to do a post graduate degree so I went to Sydney University and did economics and finance.”

He found a job at wealth manager Colonial First State in the global resources team and was an analyst in mining and energy stocks.

“I saw a big transition coming through energy markets. I thought there’d be a lot of disruption in that space because at the time, carbon pricing was coming in and was expected to be global. And it was the start of renewables, which at the time were very expensive.”

Like all financial market workers of his era – Ryan is 37 years old – the global financial crisis played a role in his development. At the time he was working with the Colonial First State global equities team.

“At the very bottom of the GFC I got to work in the global fixed income team. I got to see some amazing things about what happens when liquidity dries up in markets, interest rate expectations change and trust in the system is tested. I got to see how the system can seize up and what to look for, and how quickly problems can develop from areas that people take for granted.”

And thanks to his relative youthfulness, Ryan has never lived through a recession. When Australia last went into recession in 1991, Ryan was living in a more buoyant Ireland.

 Dermot's lessons from the GFC

1.  Balance sheets and cashflow are important.

2.  Position ahead of change and get more bullish as prices fall.

3.  Buy to the sound of cannons! Be brave when others are fearful.

He is worried, however, that Australia is in a more precarious position than Ireland was pre GFC. In 2008-09 Ireland went into a severe economic downturn.

“In terms of household debt and price to income ratios things are worse in Australia now than they were in Ireland,” he says.

Ryan’s job entails judging companies’ performance and potential. We are speaking at 9am on a Wednesday in the middle of earnings season, and Ryan has already been at a breakfast, and will be heading to a lunch later in the day, to speak to company executives.

“You are talking to serious people, who know their company and sector inside out. You’ve got to be prepared for the meetings and have good questions and get the most out of your time with these executives."

“You’re constantly trying to test and retest your theses about different sectors and companies. Right now, we are trying to get to grips with how deep the problems with coronavirus are and whether they will escalate.”

Ryan believes good management is important, but not necessarily the most important thing in a company.

“Good companies start off with having a scalable business that’s got something defendable about what it does, and an ability to manage margins and pricing. They have the ability to withstand someone trying to move into that market.

“Having that is crucially important, probably more important than management. I believe you have to be able to prepare for a time when another manager arrives. All managers are smart, but they aren’t all enlightened!” he adds.

“I believe you also need to look at what kind of assets a company has behind it. One of the things we see at the moment is that the market is really keen to value easy cashflows, or longer duration cashflows."

Things like property and infrastructure are trading on pretty lofty valuations.

“Decisions coming from the top are still important. My starting point is what assets has a business got. There’s plenty of M&A [mergers and acquisitions] going on at the moment and we think a lot of people are putting their balance sheets at risk.”

He goes home to Ireland once a year but is committed to Australia.

“I just love the lifestyle. It’s a good attitude. It’s very similar to Ireland. I love the outdoors.”

Ryan enjoys sailing, racing offshore and onshore. He has completed two Sydney to Hobart yacht races, a 650 nautical mile journey considered one the of most challenging in the sport.

We were seeking shelter as the navy evacuated the town. We radioed into marine rescue and were notified they too had been evacuated. The whole coast was up in flames and it really bought home the horror of the fires and the resilience of the community under pressure.”

Last year he was competing in the great ocean race when they hit a storm off the New South Wales coast. They sought shelter in the port of Eden, amid the worst bushfire season in Australia on record.

“We were seeking shelter as the navy evacuated the town. We radioed into marine rescue and were notified they too had been evacuated. The whole coast was up in flames and it really bought home the horror of the fires and the resilience of our community under pressure.”

He loves the adventure involved in offshore racing. “It’s a good test of endurance. In a world where things can be very prescribed. It’s something that’s really free form and interesting and testing.”

The interview ends. Ryan had given more of his time than he had. Conversation and eloquence comes easily. The last question: have you kissed the Blarney Stone?

“No but it doesn’t surprise me that people speculate that I have.”

Important Notes

While every care has been taken in the preparation of these articles, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in them including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. Performance goals are merely goals. There is no guarantee that the strategy will achieve that level of performance. The information in this document contains statements that are the author’s beliefs and/or opinions. Any beliefs and/or opinions shared are as at the date shown and are subject to change without notice. These articles have been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. They should not be construed as investment advice or investment recommendations. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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