Richard Pease’s “contractual” agreement with Henderson, which allowed him to take his European Special Situations fund with him when he left to set up Crux Asset Management early this year, was not a commonplace industry arrangement.
While the clause in his contract was simple in theory, in practice it took longer to move the fund across to Crux. Mr Pease’s move was announced in October last year. But it’s only since June that the fund has been firmly established as part of the new asset management group. “It looks clumsy with hindsight, even though it wasn’t,” he admits.
But how did he convince Henderson to give him the contract in the first place? It all came about after the company’s acquisition of his Crux employer, New Star Asset Management, in 2009.
“Andrew Formica, who is the [Henderson] CEO, had done his first acquisition with New Star, which was an incredibly ballsy, well-timed acquisition of a troubled business at what turned out to be a bargain price, but he did need to keep a few people. And I was one of the people he needed to keep, I suppose, putting it simply.”
For Mr Pease, the decision was not so easy. Until that point he had only ever worked at smaller boutique asset managers, such as New Star and Jupiter Asset Management, and preferred it that way.
He recalls: “I was a little undecided, genuinely so, because I hadn’t worked for a bigger organisation since forever, really.
“I just felt that it might be better for me to take a bit of a breather and think about life and do something for somebody else. So I had actually resigned and Andrew was very persuasive, and over supper he came up with a different sort of proposition.
“And so that’s how I got the contract, but I think it’s fair to point out Henderson have done very well out of it. It has been a good business deal for them.”
He acknowledges that when the time came to set up Crux Asset Management, the arrangement meant that he did not run the usual risks associated with starting a new UK retail fund and building credibility in the industry. At the end of September, the European Special Situations fund had £981m in assets.
Mark Little, Crux’s distribution director, seems to have played a crucial role in Mr Pease’s decision to leave Henderson after several years and go it alone with Crux.
Of his colleague, the manager says: “He and I worked together for a long time – for me, he’s the best retail guy bar none. He’d raised a lot of the money for the special situations fund, so he knows all the clients and they all like him. He was very keen to do something, he was very instrumental in my thinking.”
Other familiar names are fund manager James Milne, a colleague at Henderson for eight years, and Karen Zachary, who joined as chief operating officer this year and knows Mr Pease from their New Star days.
He continues: “From my point of view, this is a start-up that wasn’t a start-up, because we have a lot of guys I’d known for a long time who are really experienced. We have good relationships with the key brokers… and we can get good company meetings, we can pay our bills and we can actually employ the people we want rather than the people we can afford.”
Alistair Reid, the chief executive, makes “what I’m sure is a very difficult job look really quite straightforward”, says Mr Pease. But he laughs off any suggestion he may be tempted to take on the chief executive role himself, as other industry figures (such as Edward Bonham Carter of Jupiter and, more recently, Old Mutual’s Richard Buxton) have done, insisting he has “zero ambition” to run anything but the money.
“Some people are very keen to do it. I can only speak for myself: for me it would be disastrous. Talk to my wife, she’ll tell you how useless I am, so running anything other than the money would be a mistake,” he laughs.
The launch of the first entirely new fund from Crux was announced in September. The Crux FP European fund is managed by Mr Pease and Mr Milne and harks back to the former’s Henderson days, when he ran not only the special situations vehicle but a European growth product, too.
He asserts it’s not “revolutionary in any way at all” and explains that the reason for dropping growth from the name is, “because I have a natural bias towards value, in the sense we like growth obviously, but we don’t want to pay for it”.
He goes on: “I think what we’ve said is we’ll probably have between 40 and 50 holdings [in the fund], rather than 50-60 holdings [that are] in special sits. We have smaller positions in the special sits [vehicle], so we need more of them, whereas the European fund will have a slightly more focused portfolio. We won’t have the very small companies and so we won’t have to have the longer tail.
“Those are the main differences. They’ll both have similar qualities because it’s run by the same team. They’ll both have quite a decent income and what we’re planning to do is give the European fund holders quarterly income.”
Turning to the capacity of his special situations fund, he points out he has run more than £6bn before, which “was probably too much”.
“It’s not instantly about size,” he notes. “It’s about knowing your client base well and hopefully marketing to the sort of clients who buy into our process and our time horizons.
“I suppose we would probably spend a bit more time marketing the new fund, which is a similar product in many ways but with a slightly different bias, and I think special sits will obviously be open and available, but we wouldn’t expect a huge surge in demand – so I think we’re comfortable with where we are, actually.”
He does not rule out hiring another fund manager who would be at the helm of a pan-European product that, if it does go ahead, will launch in September next year. He reveals: “I’d far rather have nobody than somebody I didn’t like or who wasn’t very good. But we have got one or two guys who I think would tick that box and if they were keen, we’d be keen.”
The European equities space is hardly lacking in funds, but he stands by the timing of the new vehicle’s launch.
“In hindsight, you can always work out exactly when you should have done something,” he admits. “I personally feel we’ve seen our companies tested big time.
“I have to say, I thought the market had its moment in 2008 when the whole financial system seemed to be very much under threat. In 2009, we had a real meltdown from an industrial point of view. We’ve had all sorts of issues with emerging markets since – currencies, geopolitical concerns – you name it, it’s happened in the last seven or eight years.”
He suggests: “If you look at the portfolio as an investor, these companies have grown their profits, grown their dividends, their balance sheets are as strong as ever and their global niches are better than ever. They’ve done a very good job. And actually you’ve made good money as a shareholder.
“Some of it is on the basis that we have very low interest rates, and you can argue that’s behind some of it. But I don’t think the sort of companies that we are talking about need the drugs of QE.”
He concedes: “Unfortunately at the moment we have, I think, had more volatility than usual and it does spook investors. If you can somehow look through that, I think the direction of travel over three to five years is fine.
“I’m longing to be able to start a fund when everyone’s rather pessimistic. It’s the time to start a fund. It will probably raise less money but it’s the time to invest.”
CV
Richard Pease
2015 – present
Fund manager, Crux Asset Management
2009 – 2015
Director of European equities, Henderson Global Investors
2001 – 2009
Fund manager, New Star Asset Management
1989 – 2001
Fund manager, Jupiter Asset Management
1984 – 1989
Fund manager, Central Board of Finance for the Church of England
