A day in the life of a fund manager
Fund managers start work early. I arrive at Henderson Global Investors for an 8.40am meeting. It's not my favourite time of day, but James Henderson is having an annual meeting that will determine whether one of the funds he runs remains invested in a company. It's exciting stuff - well, exciting enough to get me to the City at this relatively ungodly hour.
But Henderson is nowhere to be seen; instead I'll be attending the meeting with his colleague and co-manager Colin Hughes. "Colin does a lot more meetings, especially with smaller companies, than I do. I have more to do with bigger companies and the marketing side of things now," Henderson tells me when we catch up later.
He was supposed to be presenting to an institutional pension fund this afternoon, but it's just been cancelled. I didn't know people cancelled on fund managers; isn't that annoying? "Oh no, I don't really mind people being late or cancelling; usually it's me running behind, so it buys me some time," he laughs.
I find the elusive fund manager – great grandson of the founding Henderson – hunched over his keyboard. He's checking the share price of the BACIT trust, which his brother runs; the company is making an announcement about its first half profits today and he wants to see how the market responds.
The family link means James can't invest in the trust, but it's an innovative company that received a lot of attention at launch due to its commitment to donate a proportion of profits to cancer research charities.
In my imagined world of fund managers there is no time for such niceties as checking up on the enterprises of one's family members throughout the day, but James's demeanour is surprisingly calm.
Our next meeting isn't until 11.30am, so until then we're looking at a intimidating Bloomberg screen filled with numbers. Thankfully there's only one screen; everyone else in the room has at least two, but James thinks that's overkill.
He flits between what he calls "long-lists" of potential companies for each of the four funds he manages – three closed-end, one open-ended (Henderson Opportunities Trust, Lowland Investment Trust, Law Debenture Trust and Henderson UK Equity Income, respectively).
Henderson says his preference for a long-list means he's more likely to make an earlier call about a company; it means he has a broader perspective about what it's doing against the wider range he has picked out. "People who keep a shortlist tend to wait until they are really confident, and that means they often buy and sell too late. I often buy and sell too early and I am trying to time things better, but it's better that way round," he tells me self-deprecatingly.
In fact, he's made a call on a company this morning and we're making a purchase. James originally purchased shares in ParkGroup a few weeks back and is adding to his holding today. He sends the order over to the broker who sits about 50 yards away, informing him of the maximum price he's prepared to go to, and the affable chap heads off to do the dirty work.
"There's been some fallback in the price recently but it's not from anything untoward, I don't think; it just ran away from itself a bit," he tells me of Park Group, while we wait for the deal to be done.
Keeping a UK focus
Later I spot that the price has fallen half a penny from the buy price that Henderson secured; surely that's frustrating? "You can't keep waiting to get in half a penny cheaper. It's wrong to waste too much time on it – either it's a company that's going forward or it's not," he says. A smart investment philosophy, certainly, but I'm a lover of sales and bargains, and I can't help thinking I wouldn't be quite so pragmatic about things; then again, that's (one of many reasons) why I'm not a fund manager.
The funds James manages are all UK focused, and he believes there is enough variety in the UK market to offer up plenty of opportunities. He's a fan of the alternative investment market (Aim) as well, citing Asos as one of his best ever buys – though he admits he sold out of his holding a shade too early.
But he's confident there will be other companies from Aim that do just as well. "There will be more like it – but Aim is much more volatile [than the FTSE] and there will be many more failures," he says.
Aim gives managers the chance to back a relatively unknown quantity, but James has the bonus of also running larger cap funds able to take advantage of the companies that go on to achieve significant success. "The Opportunities Trust gives me a meaningful amount to do with Aim, and then over time I can use [the shares] in Lowland or Law Debenture," he explains.
Many fund managers will give smaller companies a wide berth, deeming them too volatile. James disagrees with this philosophy: "Some of my best buys have been when there are still questions about the stock, because the story is yet to come out."
Our 11.30 meeting is with Photo-Me, the company that makes the photo booths that people the world over use for their passport pictures. James has been advised to speak to the company by a broker he likes. Though he says usually he doesn't pay much attention to this type of recommendation, he is intrigued by the business's plan to expand into launderettes.
The group is 20 minutes late and yet it is Henderson who is rushing about in an apologetic manner when we come to meet. James is friendly to his guests but gets to the point quickly and directly; he doesn't like to waste time in overly long meetings and wants this one done inside 30 minutes.
The business proposition is curious, but I can tell the company has caught his imagination, despite the fact that we later chuckle over Photo-Me's plan to set up launderettes in supermarket car parks; he mentions it to various colleagues throughout the day. James tells me later that usually he will tend to know whether he is going to invest in a company before they've met, because so much background research and tracking is done to get to that point; but perhaps here we have an outsider.
As we head back down to that Bloomberg screen of numbers, we stop at the Henderson trophy cabinet and he thanks me for the recent award for best larger UK income growth fund, which went to Henderson UK Equity Income in the recent Money Observer fund awards, as though he didn't earn it himself from his funds' performance.
You're very welcome, James.
After lunch there's some on-screen price checking to do – I can see how this could become addictive. James is weighing up whether to add to a couple of holdings, but decides today is not the day. The dealing rates for his funds come in, and it's been a good day, apparently.
Has he got a preference for any of his funds, or a leaning towards open or closed end? "You can't have a favourite,' he exclaims. "It's a bit like being a parent – you're not supposed to have a favourite child." Yes, but that's just what parents say, isn't it?
The truth will out
Spending a day with a highly regarded fund manager, I'm conscious of boring him with a steady flow of questions he's answered a million times before. Are there things he doesn't like being asked about?
"People always want you to have a view on the market, but I don't really," he says. Of course he follows the stockmarkets, but ultimately he doesn't think macro news affects companies' long-term outcomes: "I don't know why people worry and sell off sometimes; the truth will always out."
As James eyes up data for reports that he needs to write – he says he enjoys this as it "helps me to be clear about what I'm doing" – I sense our time is drawing to a close.
The life of a fund manager isn't as glamorous as I'd envisioned. But perhaps it's just this fund manager who has surprised me. James is a genial and astute man, but he is not one to jump into the limelight to show off those attributes.
This feature was written for our sister publication Money Observer
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
Alternative Investment Market
AIM is the London Stock Exchange’s international market for smaller companies. Since its launch in 1995, 2,200 companies have raised almost £24 billion listing on AIM. The market has a more flexible regulatory system than the main market and can offer tax advantages to investors but its constituents are a riskier investment than bigger companies listed on the main market.