Correctly judging what is noise and what is fact when it comes to investing in the stockmarket is a skill rather than a science – a trait that was lacking in some fund managers in the dark days of the global financial crisis.
Rathbone Unit Trust Management’s chief investment officer Julian Chillingworth’s wealth of experience means he has a clear memory of the ‘boom and bust’ times of the 1970s and 1980s, and that has informed how he sees the most recent financial crisis.
“To [paraphrase] the old expression, history is never the same but it does rhyme – Mark Twain said that. It doesn’t repeat itself exactly but there is a rhythm to it,” he says.
“Trends will evolve in different ways. We have spent a lot of time, as other investors have, in the last credit crunch looking at what happened during the 1930s.”
The straight-talking chief investment officer (CIO) has one main concern on this autumnal day in his glorious Mayfair surroundings: the renewed interest in the banking sector.
“I am not yet convinced that all the problems in the sector and write-downs to the loans are completely out of the way, [and] whether people fully understand what the regulation will do in terms of profitability for these banks,” he warns.
“Perhaps people will get overenthusiastic and then realise the profitability isn’t going to be quite as great as they thought. You’ve got to judge what is noise and what is fact, and that comes with experience.”
Not wanting to appear negative however, Mr Chillingworth claims that it is, in fact, commodities – a sector that has been beaten to a pulp in recent months as a result of slowing growth in China and a sell-off in the wider emerging markets – that is showing interesting opportunities.
“Certain assets are looking cheap,” he contends. “Our view is people have got overly depressed about the big miners – not the Eastern European miners, which are more volatile, but Rio [Tinto] and BHP [Billiton].”
While not overly bullish on the sector, he is encouraged by signs that the larger companies are becoming stricter with their balance sheets.
“No one is saying these things are going to roar away tomorrow, but they are looking better value than they have been for some time and the management are all talking about capital discipline, which is good news because it means they aren’t going to rush out and invest lots of money in new mines and therefore commit shareholders to an asset that won’t necessarily return value for five years plus.”
As part of his role as CIO, Mr Chillingworth is often quizzed on his projections for the UK economy.
He thinks that while the nation has enjoyed a lot of positive news in the past few months, the major factor that will pull the country out of recession is the housing market.
“The important issue for the UK market is the housing market, because the housing market boosts consumer confidence… it’s all about rising house prices. We are so hung up on the price of property in this country,” he says, adding that he expects the UK economy to surprise on the upside, both this year and next.
With more than three decades in the financial services industry under his belt, Mr Chillingworth has developed some instincts as to the right time to invest in a company.
“In my view you can’t successfully invest in the stockmarket without understanding what makes a company tick and that’s partly management and partly product,” he says.
The CIO joined Rathbones in 2001 and also co-manages the Blue Chip Income and Growth fund and the Recovery fund, but claims his successful career was nothing more than the product of a “drifting” graduate.
“I left [Southampton] university with a degree in chemistry and wanted to go into industrial production, [but] couldn’t get a job,” he admits.
“The chemical industry has virtually disappeared from the UK, so by good chance I went into investment management. I suspect within 10 years I would have been made redundant [from the chemical industry], so I think I had a bit of luck really,” he jokes.
Although Mr Chillingworth is one of the most long-standing figures in the industry, the advent of the RDR means he has had no chance to slow down.
“I’m not planning on retiring yet – let’s make that very clear,” he insists. “I have thoroughly enjoyed the first 12 years and hopefully I’ll be here for a good few more. I think the RDR gives a well-run business a lot of opportunities.
“If anything, what has happened with changes in regulation means there is probably more to be done, not less. That’s the reality.”
Mr Chillingworth says the new prevalence of fee-based advice means advisers and intermediaries “will look at those who can produce consistent returns, because their clients aren’t going to be so keen on switching from one manager to another unless there’s a very good reason”.
Consistency is something Rathbones does well. As Mr Chillingworth points out, four of the unit trust teams have been at the firm for more than a decade.
“Clients don’t want surprises, they want consistency. People are drawn to Rathbones because of consistency and a very clear process,” he says.
Rathbones’ results for the first half of 2013 revealed the group’s funds under management had ticked up to £19.9bn, an increase of 10.6 per cent in six months. But the company has ambitious plans for the future.
“We will be adding on the wealth management side – we are always looking for new people to join us and [potential] opportunities,” he says.
While the manager thinks it is “daft to set targets”, he says the company is “very hopeful” that it will continue to gradually grow the assets, although he accepts this may not always happen in a uniform manner because of market forces.
Mr Chillingworth is sanguine about Rathbones’ position in this newly evolved world.
“When I started, my boss told me if I got six things out of 10 right, I would probably still have a job in 25 years’ time. In the short term there will often be times where you won’t perform as well as others within your peer group, but what you aim to do is produce consistent, long-term performance and make your investors money.”
But he does recognise that the needs of Rathbones’ clients have changed in recent years, with customers on both the wealth management and unit trust sides looking for capital appreciation and income.
“With the increasingly ageing population, the income requirement has risen – that’s a long-term trend,” he says.
“We are very mindful on the unit trust side that we need to grow our distribution, and on our wealth management side to make sure our clients see a growing income.”
And after more than three decades, the manager still doesn’t perceive work as a chore. “Over the years I have enjoyed most of the jobs I have done.
“I think the one thing that I do like about the business is, you walk in each day and you learn something new – it may only be a small thing, but you learn something new.”
CV
2001 - present
Initially deputy chief investment director, appointed chief investment officer in August 2002. Also portfolio manager for the Rathbone Blue Chip Income and Growth fund, Rathbone Unit Trust Management
1994-2001
Head of equities, Hambros and head of gross funds at Investec
1991-94
Head of European equities, Bankers Trust
1989-91
Fund manager, GAM
1985-89
Fund manager and head of equities, Sentinel
1983-85
Equity fund manager, MGM Assurance
1979-83
Equities analyst, Philips Electronic Pension Scheme
1977-79
Graduate trainee, James Chapel
1974-77
University of Southampton
Hambros (Head of Equities) and Investec (Head of Gross Funds): 1994 - 2001
