Firing Line: Hugh Yarrow

The fund, now in its seventh year, faces significant headwinds to generate decent dividends in the current low-yield, high-volatility environment.

Mr Yarrow admits that company valuations are not as attractive, so finding that balance between quality and value is no easy feat. 

He said: “Most financial assets are placed to deliver low returns because of low interest rates and a low level of inflation. Returns have not been that attractive but it is important to manage investors’ expectation from that. We aim to deliver a fair return without exposing our investors to too much risk.” 

“At corporate level, the cost of borrowing is very low at the moment and there is a temptation for companies to borrow more money to juice up their earning growth. Borrowing money to buy back shares would help current earnings per share but it is a risk.”

What of impact of the continuous fallout of the EU referendum vote?

“We have not made a huge change to the portfolio. Most of the companies in the fund are listed in the UK but their overall revenue and the cash exposure of the underlying companies is global. The underlying cash flow of 20 per cent of companies in the portfolio is generated from the UK economy. We like global diversification because it reduces economic and political risk.”

The fund has come a long way since it was launched in 2009 by Mr Yarrow off the back of a seven-year stint at Rathbones Unit Trust Management, where he managed a number of equity income funds.

The portfolio, run from converted barn in Oxfordshire, is now worth more than £1bn, and £340m of that figure has been generated within a three-month period to 31 August 2016.

Its successes are unlikely to escape the attention the firm’s rivals. Mr Yarrow himself outperformed the peer group composite by 40 per cent at the time of writing.

What of the prospect of being poached by larger rivals? 

“We have had lots of calls over the years but you will never see a headline that reads Yarrow and Peters leave Wise Investment. It is an employee-owned company and Wise Investment was started by my father [Tony].

“We are a family. I work in the same office as my father and brother in law. Ben’s wife and my wife are sisters. We have a very nice and talented group of people who work well together.”

Myron Jobson is features writer at Financial Adviser

HUGH YARROW'S CAREER LADDER

2009, Lead portfolio manager, Evenlode

2002-2009, Investment manager, Rathbone Unit Trust Management

2002, Graduated from University of Edinburgh in with a first class degree in philosophy and mathematics