Failed re-invention: Neil Woodford
Over the years, I’ve interviewed hundreds of fund managers. Some have been prickly, combative, or monosyllabic; others articulate and charming.
Yet, irrespective of their mood and helpfulness (or lack of it), there is no one overwhelming personal characteristic that defines a good manager – or for that matter a bad one. Inquisitive? Yes. A strong grasp of financial numbers? Yes. Clever? Yes.
Some, such as Richard Staveley (investment trust Rockwood Strategic), talk a good game and deliver investment returns in spades. His enthusiasm for investing in UK smaller companies is unbounded – a recent conversation I had with him still rings in my ears.
Others such as Joe Bauernfreund at trust AVI Global are more comfortable letting the performance numbers speak for themselves. He’s delivered a 69 per cent return for investors over the past five years.
Of course, investment experience also helps. Staveley and Bauernfreund have been involved in investment management for more than a quarter of a century.
But this counts for nothing if, as we saw with disgraced fund manager Neil Woodford, a manager suddenly attempts to reinvent themselves.
In Woodford’s case, he thought his skill at generating returns from buying unloved UK stocks would translate across to identifying unlisted start-up businesses that would go onto greatness. It didn’t. Investing in unquoteds is a different investment ball game.
Both Staveley and Bauernfreund (an astute buyer of undervalued businesses) have stuck to their knitting and investors have prospered as a result.
When researching a fund, I like to focus on the thoroughness, robustness and integrity of the investment process that sits behind the named manager.
For example, I like what managers Willis Towers Watson are doing at £4.9billion investment trust Alliance Witan, parcelling out slices of the fund’s assets for external investment experts from across the globe to run.
The trust is a steady Eddie – an ideal candidate, I would say, for a core holding in a tax-friendly Individual Savings Account (Isa) or self-invested personal pension (Sipp).
A continuous 57-year track record of dividend growth is also mightily impressive. I also like the investment rigour behind JPMorgan European Growth & Income, an investment trust where the portfolio is constructed through a mix of quantitative research (financial number crunching) and qualitative analysis by its investment managers.
The result is a cracking investment fund (see last week’s ‘fund focus’ column for Wealth).
Although Scottish Oriental Smaller Companies Trust is more a peripheral than a core investment, it is also underpinned by a rigorous investment process.
Earlier this year, I spoke to its co-fund manager Sree Agarwal and was impressed by the meticulous work that goes into making the trust’s portfolio fit for purpose.
I caught up with him again last week when Agarwal was in the UK to do a bit of marketing and attend the trust’s annual general meeting in Edinburgh.
Based in Singapore, Agarwal is part of an 18-strong team at FSSA Investment Managers that has an input into the trust’s portfolio – FSSA being a specialist in Asia and emerging stock markets and part of global asset manager First Sentier Investors.
The team’s mission is to scour Asia’s main stock markets for companies which have exciting new business ideas, are led by quality management, and operate in sectors where the potential for growth abounds.
Like Alliance Witan, AVI Global, JPMorgan European Growth & Income and Rockwood Strategic, Scottish Oriental is worth considering as part of your investment portfolio
Macro considerations don’t come into the equation – they are focused on finding businesses that will flourish irrespective of the economic backdrop. Their universe comprises Asian companies with market capitalisations of below $5billion (£3.84billion).
Although a vast one, they whittle it down to 300 businesses which they continually monitor. Of these, 50 presently form the trust’s portfolio.
Before a stake is made in a business, FSSA meets the company’s directors to ascertain whether their interests as a potential minority shareholder will be fully aligned with those of management. They also do due diligence on how workers, customers and suppliers are treated.
If all these checks get ticks – and the business is top-notch and not weighed down by debt, then an investment is made.
Chinese stock DPC Dash is indicative of the company which the managers like. It owns the exclusive franchise for Domino’s Pizza in China and has already opened nearly 1,000 stores.
But it’s far behind the curve when compared to the likes of KFC which has 12,000 stores.
Pizza the action: Scottish Oriental is invested in DPC Dash, which owns the exclusive Domino’s pizza franchise in China and has opened 1,000 stores
As DPC Dash opens more outlets, Agarwal says its revenues will soar. The stock is now the trust’s second biggest holding.
Agarwal says a trust such as Scottish Oriental will always be susceptible to disruption in the stock markets it mines for investments – a result of occasional financial disruptions.
Yet, long term, it delivers – as evidenced by the 58 per cent over the past five years.
Like Alliance Witan, AVI Global, JPMorgan European Growth & Income and Rockwood Strategic, Scottish Oriental is worth considering as part of your investment portfolio.
Nottingham rebrand so off-target
Thank you for all your comments about the decision of The Nottingham building society to rebrand which will eventually mean the eradication of its Robin Hood logo.
Judged on those who have contacted me, customers are not happy with the makeover.
They accuse the society of wokeism and wasting money (the society wouldn’t tell me how much the rebrand will cost, although it did stress that it used a value-for-money agency).
Lost in translation: People are unimpressed with the use of a squiggly ‘N’ in new signage
People are also unimpressed with the use of a squiggly ‘N’ in new signage for the Nottingham which will now be called Nottingham Building Society.
The squiggle, I am told, represents a point of difference, denoting the society’s commitment to providing mortgages to customers who otherwise would struggle to get one. I have yet to fathom that explanation.
Some customers say that if Robin Hood had to go, surely an acorn or oak tree would have been a better alternative – in recognition of the Major Oak that stands in Sherwood Forest. For the record, Nottingham made pre-tax profits of £0.7million in the first half of this year (2023: £11.7million).
The collapse in profits was primarily a result of making a £10.7million provision to compensate customers caught up in the Philips Trust Corporation scandal that embroiled several societies besides Nottingham (Leeds, Newcastle and Saffron).
Also, for the record, Nottingham Building Society’s boss, Sue Hayes, received remuneration last year of £478,000, including a £62,000 bonus. No wonder Robin Hood came a cropper.
Premium finance? Ban it now
Recent regulatory efforts to make the car and home insurance markets fit for purpose have failed spectacularly.
So, forgive me for being so sceptical about the regulator’s latest probe – this time focusing on the rip-off ‘premium finance’ which many customers who pay for cover through monthly instalments are forced to cough up for.
Nothing other than banning costly premium finance will suffice, but I bet you that the regulator (the Financial Conduct Authority) will cop out.
As for the taskforce set up by the Government to specifically look at the soaring cost of car cover, it is well-intentioned. But it’s the equivalent of closing the gate after the horse has bolted.
Over the past two and three-quarter years, insurers have got away with the equivalent of blue murder by imposing unjustified premium hikes on many policyholders, especially the elderly.
Sadly, those financial abuses will fall outside the taskforce’s remit. If you’re a victim of premium finance, email: jeff.prestridge@mailonsunday.co.uk.
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