Jun Bei Liu remembers her very first encounter with the stock market. As a teenager in Shanghai, she watched in fascination as her father stuck massive papers full of share price charts onto walls of the house built by her grandfather.

“It was like decoration,” Liu says. “We started off in his room, then it expanded to my room, then it expanded to the rest of the rooms upstairs, and eventually made its way down into the living room and kitchen and everywhere.”

Now, Liu’s father defers to her for investment advice. As lead portfolio manager at Tribeca Investment Partners, Liu manages the Alpha Plus Fund, which holds long and short positions on Australian equities. Under her guidance, its value has tripled from just over $300 million to $1.1 billion in three years.

Her current role is one that a 12-year-old Jun Bei, then a student in China, would literally not have been allowed to dream of.

“Our teacher asked us to write: what do we want to be when we grow up? And [back] then, the Chinese system [had] ... no focus on individuality, it’s about what’s better for the collective,” Liu says.

She recalls catching a glimpse of the notebook of her classmate, who had written: ‘I want to be an unknown police woman that helps out society without anyone recognising’.

“My one was: ‘I want to be a world-famous politician’,” Liu says. “My teacher marked it down. Her comment was, ‘please dream of something more realistic’ ... there was a lot of pressure to conform.”

Her teacher’s advice never stuck, and Liu now oversees the allocation of more than $1 billion in the midst of geopolitical uncertainty and a rapidly shifting economic environment. Since taking sole responsibility of the Alpha Plus Fund, a pandemic has slammed the brakes on the global economy; Russia’s war on Ukraine has sent commodity prices skyrocketing, creating food security crises and rampant inflation; central banks are pumping up interest rates as a result; and investors are less willing to take on riskier assets.

Yet the fundamental variables driving sharemarkets don’t change, Liu points out. A listed company’s share price is perennially reflective of two things: the business’ underlying earnings, growth, and management; and then how much people are willing to pay for it, or what we know as investor sentiment.

That’s where things get hairy. “People underestimate the emotional side of sharemarkets. Most of the time, [stock price] movement is due to emotion,” she says, adding that emotional bias has “significantly amplified” since COVID.

“People underestimate the emotional side of sharemarkets. Most of the time, [stock price] movement is due to emotion.”

“What varies a lot of the time is actually not due to company earnings. It’s because of what people want to pay. And that is behavioural.”

Her job is to block out the noise, Liu says. But today’s equity markets are increasingly influenced by the whims of retail investors, many who bought into the COVID crash of February and March 2020, and who Liu says now make up a “dominant force” dictating the sharemarket. The number of retail investors in Australia doubled to 1.43 million between mid-2020 and mid-2021, Investment Trends research shows.

Perhaps the sharpest example of retail investors’ influence is the short squeeze of GameStop, engineered by Reddit users in January 2021. Cryptocurrency, too, started as a niche underground movement that was supposed to be a hedge against inflation, but has become so mainstream it’s now proving to be bound by the same rules governing traditional assets.

“Retail investors are a driving force of a lot of FOMO (fear of missing out), or, you know, ultimate capitulation,” Liu says, adding that they tend to sell when the market’s bad, or push bull markets even higher.

These novice investors have also contributed to a swell of what Liu calls “passive money” in global sharemarkets due to their tendency towards products like ETFs, which can be likened to a bundle of investments that tracks the performance of an underlying index.

For Liu, an ‘active’ fund manager whose job it is to pick stocks with the objective of out-performing indexes, this is good news.

“What [passive money] does is create volatility and inefficiency in the market. And it does, in a way, provide a pretty good market for active investors,” she says.

Active investing paid off earlier this year when Liu caught wind of the relative underperformance in Magellan’s flagship fund. That, combined with rumours of leadership instability, led her to take a short position on the stock, predicting the share price would struggle. She was right, and Tribeca made $15 million by shorting Magellan.

“We’re seeing the market dynamic changing,” Liu says. “It really pays to do your homework.”

For someone whose job is defined by assessing dips and troughs that shift by the minute, is there anything that hasn’t changed?

“I am a curious person. I have a very curious mind, I love to learn about new things.” It’s the same trait she has had as a young girl, she says.

“When I was in China, all I ever wanted to do was be the hostess in a restaurant and open the door. I never thought I would go to high school [or] university because we were so poor. We never thought it was possible.

“I always say: don’t set a goal. The sky is the limit.”

Disclaimer: This material has been prepared by The Sydney Morning Herald, published on 10 July 2022. HM1 is not responsible for the content of linked websites or content prepared by third party. The inclusion of these links and third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the linked websites and third-party content. This information is for general information only and does not consider the objectives, financial situation or needs of any person. Before making an investment decision, you should read the relevant disclosure document (if appropriate) and seek professional advice to determine whether the investment and information is suitable for you.