InvestmentsNov 24 2014

Q&A: Robin Hepworth

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

There’s an awful lot more information out there than there used to be. It is there for everyone so it doesn’t necessarily make the job of outperforming any easier.

I don’t remember doing anything in regulation and compliance 15, 20 years ago. Now it’s a major part of all investment management and is a serious issue, particularly for smaller players.

We’re small- to medium- sized and we are finding the costs significant. But for the boutique operators, I don’t know how they’re coping.

There’s a danger that’s going to lead to even more consolidation. Regulation is meant to improve the protection of the consumer but its going to lead to having only medium and large companies surviving.

Benchmarking is dangerous. 55 per cent of the weighting of the World Index is the US equity market, so lots of our peer group will say you have to have 30-70 per cent in the US. If the US stock market goes up, its weighting in the index goes up

If you’re taking a bench-marking approach, you are naturally buying stocks that have already gone up in value. We all know that’s the wrong sort of behaviour.

We should strive to diversify and reduce volatility. But the way of achieving that is looking at other methods, not looking at the benchmark,

Passives have a role to play. They outperform most active managers, and with lower costs.

Even though they probably outperform most active managers, on average they still underperform the index. Part of that is costs, which aren’t always as low as they should be.

If 90 per cent of the stock market was passive, it would be inefficient. A company announces dreadful results, 90 per cent of the market would carry on holding the shares.

In terms of fund performance, advisers typically look at three years or occasionally five. Why on earth would you restrict yourself?

Luck can and does play a part. The longer period you can look at, you must do so.

Even when you’ve got 20-year numbers with the same fund manager, they just don’t look at it. It’s not just the consumer, it’s even the professionals which often don’t do a proper job.

My average holding period in the fund is eight to 10 years. There’s some stocks now that I’ve held for 20 years.

Keeping turnover down is part of our philosophy. Keeping cost down, investing for the long term.

Risk means different things to different people. The way we run portfolios naturally leads to lower volatility because we’ve got a higher number of stocks.

If your value-at-risk models are saying you should be looking to reduce the volatility of your portfolio, that’s going to constrain your stockpicking. You’re going to be thinking about reducing volatility rather than taking advantage of volatility.

On the whole, financial services and the asset management industry came through the crisis pretty well. There were no bailouts required for asset managers.

I don’t think most consumers have a good understanding of financial services. And it’s difficult for them to get it because most of your life you don’t need it.

There’s no point in teaching it in schools because no-one’s going to be investing in stocks and shares when they’re 18, 20 or arguably even when they’re older. There’s no point teaching kids about mortgages because it will be another 10 years before they have mortgages.

The best advice I’ve received is “Elephants don’t gallop.” It’s easier for a small company to double in size than a large one.