How long have you worked in the industry and how did you end up being a fund manager?
I come from a farming background. My Father’s a farmer in Wiltshire and I’d always been primed to take over. I read agriculture at university but I decided while I was there to do something else for a while; agriculture wasn’t going that well at the time and so I gravitated towards London.
My first experience in the city was as an intern for Fleming Private Asset Management. I was given an internship for a few months which turned into six and I really enjoyed it and got the buzz of working in the industry, so I took my first full time job at NatWest Stockbrokers in late 1997, working in the private client department. I moved into asset management at Sarasin in 2005 because I wanted to focus on managing money, starting in the multi-asset team which was running around £1.5bn. I went on to launch the global equity income fund in 2006, working alongside Graham Ashby a well known income investor and stepped up to take over as sole manager when he left in late 2007.
Prior to running money, what other work have you done?
I tried a few things when I first moved to London, probably the one that stands out most being a stint in recruitment.
What qualifications do you have?
I passed various exams to become a member of the Securities Institute early on in my career, and took a paper on derivatives which has been useful given my use of derivatives during my career.
What is your investment style what made you go down that route?
I’ve always wanted to run slightly lower volatility portfolios. I think they outperform over the long term. I want to invest in high quality businesses that can generate real, repeatable returns and I want to be able to understand how they’re able to do that. I look for companies which can grow – I’m not a value investor looking for high yielding equities which will benefit from reversion on the share price – I think companies which are growing over the long term will ultimately produce better returns and I don’t think the market is very good at pricing that.
Which investor do you admire the most?
It’s a tough one to answer without sounding cheesy, but the industry is good at producing similar products, a lot of the time, but doesn’t often circle back to the client and find out what they really need. I think the commercial guys, who take the time to do this, I admire most. If you look at people like Fundsmith over the last five years they’ve taken the time to listen to what their clients want and they’ve done very well, and I think this kind of approach is important, we need people who can blaze a trail – there are too many ‘me-too’ funds. If you look at equity income this is certainly the case, and I hope my portfolios offer something different.
You run both and open and closed ended fund, what are the major pros and cons about the two vehicles?
I’ve only been running a closed end fund since May last year as they didn’t have them at my last company, and I’ve really enjoyed it. Having a board really makes you focused. If I can persuade them that it’s worth doing something different that gives me a real sense of achievement, but it also means I must try harder to understand what the client (the board a proxy for the clients) wants. In terms of the tools at my disposal I think the ability to go down the market cap scale with less liquidity concern is really important, and I think being able to use gearing is also a major asset.
Over the course of your fund management career, what would you say has been you best investment and why?
Rather than a specific stock I’d highlight tobacco stocks generally. I’ve owned them throughout my career and they’ve had continual pricing power throughout. I’ve heard Neil Woodford say he wished he had owned more exposure throughout his career before too. It’s also worth saying that this is an interesting time for them due to the fact that they may now have the potential to grow – with new ‘reduced risk’ products like e-cigarettes & heat not burn coming through. For consistency of returns, these businesses have done very well for income investors through time.
And the worst?
One sector, which is hard to avoid as an income investor, is telecoms and I’ve always struggled to make money out of it. This is a classic example of a sector with all the worst things going for it; it’s highly regulated, the companies in it are often highly leveraged and not growing, the regulator is constantly opening it up to new competition, return on investment is often poor so it suffers from underinvestment, so it offers poor returns. The companies in it are often high yielders, but they are often value traps. Some of the biggest mistakes I’ve made in my career were in telecoms.
What newspapers do you read, and where else do you look for insight when it comes to the macro?
I read around a lot of newspapers but not any one religiously, nothing stands out. Bloomberg produces some good macro stuff and I read The Economist, but the bulk of our macro insight comes from the wealth of information which comes across the desks at Martin Currie. My experience in multi-asset leads me to pay attention to what’s going on in the bond markets, as I think there are sometimes leading indicators to be found here, but generally I find the newspapers may contain the odd gem, but also contain a lot of fluff.
What made you leave London for Edinburgh and Martin Currie?
I was looking for a new challenge really, I think one gets to that point in a career. I was in a stable position at Sarasin and had been there for many years, and Martin Currie offered me a position where I could build a team from scratch which I’d not done before. The opportunity to build a team solely focused on global equity income was a really interesting challenge to me.
What are the next challenges for your flagship trust, Securities Trust of Scotland (STS)
I want to put together a consistent period of performance where volatility is lower than the index. It’s really difficult to do that, but what I want the trust to be known for is a market leading risk adjusted return. My investment time horizon for the trust is five years and I’ve been running it for one. If I can look back in four years and say we’ve produced market beating performance, low volatility and consistent growth in the income, I’ll be happy. It’s that reliability that I want to deliver.
Do you plan to launch more funds under the income team?
In four years’ time I’d like to have a stable of funds. In my last organisation we had two types of income fund – one offering a higher yield and the other investing in lower yielding companies with strong growth prospects. I think it’s important to offer a diversity of product which suits different kinds of investors, who have different requirements for income.
Finally, if you didn’t have to be here, where would you rather be, if you could be anywhere, right now?
I’ve just come back from holiday, actually, and it’s quite nice to be back in the office as it’s good to be back in the thick of it and immerse myself in what’s going on, but I think if I could be anywhere I’d probably be doing some sea-fishing on an island somewhere in the Caribbean, or maybe the Seychelles.