When Julie Dean announced her departure from Schroders two years ago this month, it came as something of a shock to the investment industry. She had been at the asset management giant, as head of the business cycle team, for only a short time – little more than a year – following its acquisition of Cazenove Capital Management in 2013.
But it was less surprising that she turned up again at Sanditon Asset Management – a boutique asset manager that has much more in common with Cazenove than Schroders. It saw her reunite with former Cazenove colleagues Tim Russell and Chris Rice as she launched the TM Sanditon UK fund.
“The environment at Sanditon is very conducive to the sort of way we like to think about markets and about portfolio positioning,” she acknowledges. “We’re quite rigorous in our attention to how we use the business cycle, to ignoring a lot of the white noise that comes from all directions in markets, paying very close attention to the price we pay for stocks, that’s always going to be a key determinant of your return. There’s space to think here, which is very important.”
Does that mean this was not the type of environment at Schroders? “Schroders is a hugely successful business, a very well-managed business, very good at what it does,” she replies. “The pull for me in coming to Sanditon was that I think I’ve always been a better investor and been happier working in very small team environments and there was a very strong pull to come and join Tim and Chris.”
She suggests: “It’s much riskier being an owner-manager, putting your own capital at risk in a business sense. But that only, in many respects, serves to reinforce the relationship a fund manager should have with their client capital because you are completely aligned in your interests. Our business success depends upon us generating consistently superior returns, because otherwise they will take their money away.”
Explaining the business cycle approach she has been using throughout most of her fund management career, Ms Dean says: “One of the key elements is anticipating change, so anticipating where stock prices are likely to be in the future. Stockmarkets should be a discounting mechanism, so it’s all about trying to anticipate change ahead of time – sometimes when you do that, you can be a little bit early.”
When launching the TM Sanditon UK fund in 2015, she was indeed early in making a buy call on the commodities sector. She admits the fund had a “bumpy start”, as she was buying stocks others were selling en masse. “The fourth quarter of last year was a tougher time for the fund but I wasn’t worried about that, because, having used the business cycle as the anchor to the investment process for the last 20 years, I’ve been through periods where we may underperform for six months or so before the view comes right, which it did this year.”
Now the fund is highly ranked in the IA UK All Companies sector. “If the performance is there and the numbers are there, then people will take notice. People will want to understand how you generate the return and if they believe you can repeat it, they might trust you with their hard-earned cash.
“The beauty of the business cycle approach is that it hasn’t changed in the 20 years we’ve been using it. The correlation of returns that it relies upon are still present in markets despite gross manipulation of asset prices by central banks, and I’d like to think the track record I built up running the Cazenove Opportunities fund shows that this is a process which can be applied successfully to all market conditions.”
| CV - Julie Dean |
2015 – present Manager, TM Sanditon UK fund and director, Sanditon Asset Management 2013 – 2014 Head of business cycle team, Schroders 2002 – 2013 Manager, Cazenove UK Opportunities fund, Cazenove Capital Management 1998 – 2002 Manager, HSBC UK Growth fund and HSBC British fund, HSBC Global Asset Management 1992 – 1998 UK equity fund manager, GT Asset Management |
In May this year, Ms Dean bought into HSBC, having not held any banking groups in the portfolio until then. She accepts that so far this year, banks have been one of the worst-performing sectors in the market. This stage in the business cycle is no time to be overweight banks, she says, which is why she remains underweight.
“The capital ratio of HSBC is now very strong because they spent the last decade resizing and recently they sold a couple of additional assets,” she explains. “You’re buying an asset that is on a value rating, it’s a big discount to book, it’s got a high dividend yield that can be paid.
“What makes it change, what makes the stock better? It might be that an upward movement in interest rates over the next couple of years sees part of that valuation discount close.”
She adds: “To us it seemed sensible to close some of the underweight, just try and find a way of playing a shift in the yield curve, and we felt HSBC was a way of doing that. I don’t want to make too much of it, it’s only one stock, but it’s something we’ve been thinking about for a while.”
Earlier in the year, Ms Dean also took some profits in the commodity part of her portfolio after a rally that saw holdings such as Tullow Oil do very well.
“I always say to my clients [that] a good active manager, and that is what you are paying the fee for, will shift your capital away from bad risk and towards good risk,” she reasons.
“If a share price has risen to the point where you think, ‘OK, we’ve had most of the return here,’ then why not take some profit out and put it to work somewhere else? Where maybe the risks look higher but where actually, because prices are lower, it just feels like there’s more risk.”
Another change this year has been adding more consumer cyclicals to the portfolio, including ITV, which she believes “the market has unfairly punished”. The last time she was overweight these types of companies in her portfolio was from 2012 to 2014, noting “that was the time when the big money was made in these stocks, because it was when UK services PMI was really beginning to accelerate”.
Recently, there have been several instances of high-profile fund managers taking more senior roles at asset management groups. Does Ms Dean see herself doing the same?
She insists she will only ever run money at Sanditon, but points out she is also a director and major shareholder.
“Fund management, when you are our size – when you’re any size, really – should be a very simple business, it’s just difficult to do it well, that’s the thing. So no, I’ve no interest in managing people or becoming a manager of a business, they’re two very different skills,” she says.
For now, Ms Dean will continue running the one fund at Sanditon, with an offshore version planned. She notes: “We don’t need a bond fund or an income fund. That’s a decision for when we’ve achieved success. So if in five or seven years’ time it’s looking successful, then, as a business, we might think about [it].
“Those will be nice decisions to have and they’re a long, long way in the future.”
Ms Dean joined the City in 1992 when the issue of gender diversity in fund management was not a topic of discussion within the industry. A number of fund managers and other voices are now speaking out about the scarcity of women running UK retail funds, but Ms Dean is no fan of positive discrimination for “the sort of intelligent, sparky women the City needs”.
She says: “In many respects, fund management is the perfect part of the City for a woman to come into because the only thing that matters are the [performance] numbers you generate. If those numbers are competitive, then you will be successful, and it doesn’t matter whether you are a man or a woman, it’s your numbers that count.”
Turning to her own prospects, it seems likely Ms Dean will be around for a while yet. She notes: “If you like markets and you like companies and you like getting it right, then you can carry on doing it [fund management] for a long time. I’m just 46. I could quite easily do this for another 20 years, maybe longer.”
