Between them, John Pattullo and Jenna Barnard, fixed income managers at Henderson Global Investors, can lay claim to both these routes into the industry.
Mr Pattullo trod the traditional path: economics at school and university, followed by a qualification in accountancy. He was inspired by his father, who had established a career in finance.
“I always wanted to be a fund manager. I used to want to be an equity manager ultimately, to be honest. But some good advice said bonds are inefficient and under-researched and were going to grow very large, especially with the euro – this was way back in 1997,” he explains. “It was a conventional route in, but I guess I grew up with Thatcher and privatisation, so I always quite enjoyed stockmarkets and investing. I like the daily change you get in bond markets.”
Ms Barnard’s route into the industry was more accidental, even if her degree in philosophy, politics and economics suggests otherwise.
“I had an interest in economics, but at university I was adamant I didn’t want to work in the City. I had an image of it that I didn’t find very attractive,” she admits. “I took a year off to earn some money, because I thought I was going to go to the States and do a master’s degree in politics. In that time off, I needed to earn some money so, naturally, recruitment consultants would put me up for City jobs because of my economics background.
“Once I started, I loved it and didn’t look back. I dropped the idea of studying the next year and just carried on.”
Her preference for bonds took root in 2001 when she was working as a trainee equity analyst. She harks back to that year when an equity bear market started and she began to think bonds was an “interesting growth area”.
The partnership between Mr Pattullo and Ms Barnard formed shortly after she joined Henderson in 2002 as credit analyst, assistant portfolio manager. He had been at the company since joining as a trainee manager on corporate bonds in 1997, although he had risen to the rank of associate director of corporate bonds by 2002.
Pairing up
It was about a year before the pair began working together closely. They took over the running of the Henderson Preference & Bond fund after the retirement of the former manager and followed this with a launch of their own.
Mr Pattullo explains: “It was a high-yield fund, but we relaunched it as a strategic bond fund. It was the first new concept we launched together.”
As with any good working partnership, the managers have “occasional disagreements”, but they insist there has only been a “handful” of “intense” disagreements in the past 10 years.
Ms Barnard says: “The more common scenario is one person has quite a strong conviction and the other person doesn’t, in which case you give the person with the stronger conviction the leeway to do the trade.
“The scenario where we both have strong conviction in the opposite direction, so we have an intense disagreement about something, is reasonably uncommon.”
“The danger is [when] we both believe completely the wrong thing and back each other up,” Mr Pattullo adds.
Mr Pattullo refers to “living and breathing” the franchise they have built up at Henderson, which includes the Henderson Fixed Interest Monthly Income, and Henderson Cautious Managed funds and the Henderson Diversified Income investment trusts. But they also credit the wider fixed income team and the other resources available to them at Henderson with helping to run the funds.
“Our philosophy is very much clients-first. We care a lot about what our clients need and want and expect, and we have to deliver for them. When we say they’re our funds, they’re not – they’re our clients’ funds,” explains Mr Pattullo. “We need to keep them happy; if they’re happy, we’re happy.”
Testing environment
Turning to the highlights of their respective careers, the pair recall the credit crisis a few years ago as being “seared on the memory”.
“That was a tough time for anyone working in the financial services industry,” says Mr Pattullo. “We actually got through pretty well. We were second-quartile in 2008. We used credit derivatives quite a lot to hedge out risk. We took a lot of money during that period, which was super, but stress-wise it was tough.”
If there was ever a time when one might consider a career change, it surely would have been then. But both Mr Pattullo and Ms Barnard remain devoted to fund management.
However, they agree that the industry underwent some changes during the period, resulting in consolidation, with Henderson buying out New Star Asset Management and then asset manager Gartmore.
“To be fair, some of the bigger players came out stronger: M&G came out stronger and Invesco came out pretty strong. But other people disappeared and went bust,” adds Mr Pattullo.
Ms Barnard also points to the number of new funds launched, particularly in the strategic bond sector, in the past four or five years. The managers estimate that they manage the third-oldest strategic bond fund in the UK.
“Some people launched at the bottom of the market and have ridden all the way up, but of course they haven’t been tested through the crisis, which is great commercial sense. But I think we’ve been tested in most environments,” says Mr Pattullo.
The managers came into 2014 optimistic on the outlook for bonds, with the yield on the Strategic Bond fund at roughly 6 per cent.
“We were very confident in providing income, but we thought we might be able to make a bit of capital,” explains Ms Barnard.
“Government bonds were the main cause of concern last year because of the very sharp summer sell-off. Actually, we thought that the longer-dated government bonds – I’m talking 10-year bonds – had priced in quite a lot in terms of future rate hikes and were looking reasonable value. We started the year with 10-year yields at around 3 per cent in both the US and UK.
“Today, 10-year yields are about 2.6 per cent, which is actually the lower end of the range we think it might trade in, so the outlook is a bit more difficult from here. That said, the fund is up 3.4 per cent year to date, so if we did income return from here that would be an additional 4 per cent.”
Harking back to her perceptions of fund management before she became swept up in the industry, Ms Barnard acknowledges that her preconceived ideas of the City did not match with the individuals she found working there.
“As soon as I started, I realised you meet intelligent people with a lot of integrity, which wasn’t necessarily what I expected. It was much more reasoned and considered and interesting than I thought it might be.”
Speaking to this pair of fixed income managers, their devotion to the job is clear. Ms Barnard cites her interests in swimming, running and the theatre as “anything to keep my mind off work”.
Mr Pattullo adds: “There is a core client base who need income, and that’s what we try to focus on. That philosophy is very important to us. We want to run our franchise and our clients’ money to their demands and expectations.”
However, the manager admits that “you need some sort of distraction from the markets, because they keep going”.
