Starting with assets of just £13m Mr Moore has seen the fund grow to £224.3m through increased inflows backed by consistent performance.
Mr Moore is clearly enthusiastic, not just about investing in general but in how an unconstrained approach to managing portfolios, including the Standard Life Equity Income Trust, can offer a different view on income investing.
“We diversify more. We are avoiding the heavy concentration of other UK equity income funds to large-cap, slow-growth stocks. Instead, we are hand-picking the best of the best; the very highest-conviction ideas. Our process – and a 14-strong team – helps me pick the very best, highest-conviction ideas to make sure the portfolio is positioned to produce an exceptional experience for our clients.
“Our ability to add value as a house is greatest when we’re picking stocks because we are benefiting from the strength of our resources, so the fact the economic recovery is picking up momentum can only be a good thing, but we have shown since I took over the fund that we haven’t required some kind of blistering economic growth to achieve top-decile returns.”
He is also keen to point out the emphasis the fund has on the total return potential when building the portfolio, by looking beyond static dividend yields and outside the income stalwarts.
“We take a more holistic view to income investing and actually it’s not all about dividend yield. We will achieve 110 per cent as per the IMA mandate over a three-year period. That’s a given, but we don’t think that is enough; we don’t think investors should have to settle for just a better-than-average dividend yield because that neglects the power of dividend growth and capital growth.”
The approach, backed by the UK equity team’s investment process, which includes a “winner’s list” of the top-20 ideas, sees the portfolio having a minimum position size of 1 per cent and a maximum size of 5 per cent in any one stock.
“Because we have conviction in all of our names, by definition it’s a concentrated portfolio of typically 50-60 ideas at any one time. And because it’s concentrated and based on conviction levels, we’re not allowing the index to influence our thinking, so we can own just as much in a small-cap stock, if we have conviction in that, as we can in a large-cap stock.”
In the fund’s top-10 holdings – such as BT and Vodafone – traditional income stocks sit alongside small-cap names such as Cineworld, Staffline and Tyman.
“There is a huge consensus within the IMA UK Equity Income sector that it is a given among many UK equity income funds that they should hold these [traditional large-cap] stocks. I’m questioning that consensus… because we genuinely don’t believe these are the best top-10 ideas in terms of total return. They tick the box in terms of dividend yield but that’s not looking at income holistically; it is looking at it in a static time frame.
“The benefit of an unconstrained approach is that it lets us open up the investable universe beyond the traditional stalwarts.”
An example is easyJet, which the manager bought in January 2012, and which has provided better-than-expected income through increasing and special dividends. This compared favourably to a traditional income stock such as AstraZeneca, which had a higher initial yield but has not seen any dividend growth during the same period.
“It is turning income investing on its head, because AstraZeneca was the obvious choice – it had the 5.5 per cent yield versus the 2.5 per cent easyJet was offering and the majority of income investors would have plumped for AstraZeneca. But we need to look at income more holistically, by looking at not just the dividend yield but the overall total return. The process is constantly throwing up new opportunities, so while easyJet has been a fantastic source of total return, there are more easyJets coming through the portfolio all the time and that is the benefit of the resources and processes we have.”
Part of the fun of fund management for Mr Moore is “analysing situations, companies, sectors, markets and looking for themes and trends and seeing how those evolve.”
There are some people who instinctively know from a young age what they want to do with their life and for Mr Moore his destiny in fund management was determined early on.
He explains: “I’ve been fascinated by numbers from a very early age. I can remember, when I was very small, I had a little notebook that I marked off on the train journey [logging] how many people got off at each station. Then I used to analyse the trends. Now I look back on that – I’ve still got that notebook – and I think that was an early indication that I was going to be looking for trends,” he laughs.
This early interest in numbers led to Mr Moore completing a degree in economics and politics, although it was a stint doing work experience at Brewin Dolphin that crystallised his desire to follow a career in fund management.
He adds: “I’ve been active in my personal investments since a very young age, although it had to be through my mother at that time. When I was 13 I had shares in Thames Water. That was my first investment. I’ve always been interested in what drives share prices.
“I don’t think I had a very sophisticated way of working out why Thames Water and not, say, Northumbria Water at that stage,” he laughs. “But that was what set me off and then it sprang from there. So it is something that’s been part of me for a long time; it’s something my wife would probably say I’m heavily into. I’m passionate about investing. Overseeing the funds I manage is a tremendous privilege and one that I take very seriously.”
His career has come full circle after starting as an investment analyst and assistant fund manager in the UK equity team at Schroders among some well-known names such as Jim Cox, just as the tech bubble was growing.
“I’ve seen some interesting situations. The tech bubble was one of the most interesting because it was the human instincts of fear and greed at their most extreme – particularly greed at the top of the market in 2000. So that was fascinating working in the UK equity team and then I worked on the emerging markets team and that’s how I eventually met Keith Skeoch [chief executive of SLI].”
Having initially joined SLI on the emerging markets equity team, he was tempted back to UK equities in 2006. Taking over two institutional funds in 2007, it was his appointment as manager of the SLI UK Equity Income Unconstrained fund in 2009 that has seen his career lift off.
It is clear Mr Moore is not going anywhere for the foreseeable future, noting: “It’s now in my blood to the extent that I can’t imagine any other career. I’m living and breathing fund management.”
After all, the company is renowned for breeding a generation of ‘Standard Lifers’ who spend their entire careers at the firm.
CV
THOMAS
MOORE
2011 – present
Appointed manager of the Standard Life Equity Income Trust
2009 – present
Appointed manager of the SLI UK Equity Income Unconstrained fund
2007 – present
Appointed manager of the institutional Stock Exchange Asset fund and International Asset fund
2006 – present
Member of the UK equities team, Standard Life Investments
2002 – 06
Investment analyst; emerging markets equity manager; investment director for emerging markets at Standard Life Investments
1998 – 2002
Assistant fund manager UK equities; investment analyst emerging markets at Schroder Investment Management
1998
Graduated with a BA in economics and politics from Exeter University
